C#: Draw one Bitmap onto Another, with Transparency

Specify the transparency color of your small bitmap. e.g.

Bitmap largeImage = new Bitmap();
Bitmap smallImage = new Bitmap();
--> smallImage.MakeTransparent(Color.White);
Graphics g = Graphics.FromImage(largeImage);
g.DrawImage(smallImage, new Point(10,10);

CompositingMode.SourceCopy is the problem here. You want CompositingMode.SourceOver to get alpha blending.