Transparency - Drop Shadow Effect

I'm operating Photoshop 7.0.1 on Windows XT.
I can't seem to figure out how to preserve the transparency in a picture when I add a drop shadow effect.
1. Increased the canvas size to allow for the drop shadow
2. Selected and cut the extended canvas area (to be transparent)
3. Selected the image and created a new layer
4. Added the drop shadow effect to the image layer
5. At this point the image appears to have a drop shadow on a transparent canvas; but that is not the case.
I'll be placing the graphic in Pagemaker. Any tips would be appreciated!
Deb

In order for Pagemaker 7 to simulate transparency, you need to save
your image in Photoshop with a clipping path.
This means that you need to select the part of the image you want to see using the selection or pen tools, and then define the selection
as a clipping path.
Assuming you have an image ready to be saved for Pagemaker, try the
following procedure.
Select the part of the image you want to see in Pagemaker.
Open the Paths pallet and select "Make Work Path" from the pallet menu.
Open the Paths menu again and this time select "Save Path".
Go to the Paths menu again and this time select "Clipping Path" from the pallet menu. When asked, select the name of the Path you had previously saved.
Save the image as a Tiff file.
Now when you place the image on a coloured or textured background in
Pagemaker, it should only display the part of the image you selected in Photoshop. The clipping path you created in Photoshop will hide the unwanted background of the image.
Hope this helps

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How to place multiple images of hand paintings with drop shadow effects on room backgrounds?

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