Whatever image you try to put over the magic pink area of the background will not show. This seems to be normal behaviour, I have seen it in other Sysmetrix.
There is one way around that. Make the background a solid color with nothing on it (not magic pink). Your other images will be on top of it as 'graphics'. Then you check the box "copy desktop background for pseudo transparency'. You will be able to accomplish what you are trying that way.
Edit: Also, if you do it this way, you can have nice smooth edges on you clock.