Transparent VB6 OCX

I have created a simple transparent control which displays a circle shape control and a label.

The usercontrol backstyle is transparent, shape control backstyle is opaque and it works/looks just fine and drags and drops just fine when it is used as a control on a form.

However, when the control is used as part of another usercontrol the drag drop gets all screwed up and the background behind the circle is always white making it blocky and UGLY!!

I have attached the source for the control and the ocx test project in the zip so you can see what I am gibbering on about ;)

Help would be very gratefully received as I have a deadline on a larger project which is being held up by this.