Currently the image margin is XP default blue.

any suggestions what is going wrong...

Code:
Option Strict On

Imports System.Windows.Forms

Public Class ContextMenu
    Inherits ContextMenuStrip

    Public Sub New()
        Me.RenderMode = ToolStripRenderMode.ManagerRenderMode
        Me.Renderer = New Renderer
        Me.SetStyle(ControlStyles.SupportsTransparentBackColor, True)
        Me.BackColor = Color.Transparent
        Me.AllowMerge = True
    End Sub
End Class

Public Class Renderer
    Inherits ToolStripProfessionalRenderer

    Protected Overrides Sub OnRenderToolStripBorder(ByVal e As System.Windows.Forms.ToolStripRenderEventArgs)
        e.Graphics.DrawRectangle(Pens.Gainsboro, e.AffectedBounds)
    End Sub

    Protected Overrides Sub OnRenderMenuItemBackground(ByVal e As ToolStripItemRenderEventArgs)
        If e.Item.Selected Then
            Using sbr As New SolidBrush(Color.FromArgb(50, 0, 120, 255))
                e.Graphics.FillRectangle(sbr, e.Item.ContentRectangle)
            End Using
        End If
    End Sub
End Class
example