Texture Coordinates
Note that it is stretched/squashed to fit the rectangle. You can adjust that by adjusting the texture coordinates. For example, if you change the lines where u = 1.0 to u = 0.5, then only half of the texture is used and the remaining part will not be squashed. So, if you had a 640x480 image that you wanted to place on a 640×480 window, you could place the 640×480 image in a 1024×512 texture and specify 0.625, 0.9375 for the texture coordinates. You could use the remaining parts of the texture to hold other sub images that are mapped to other panels (through the appropriate texture coordinates). In general, you want to optimize the way textures are used because they are eating up graphics memory and/or moving across the bus. This may seem like a lot of work for a blit, but it has a lot to do with the way new cards are optimized for 3D (like it or not). Besides, putting some thought into how you are moving large chunks of memory around the system is never a bad idea. But I'll get off my soapbox.
Let's see where we are so far. At one level, we've written a lot of code to blit a simple bitmap. But, hopefully you can see some of the benefit and the opportunities for tweaking. For instance, the texture coordinates automatically scale the image to the area we've defined by the geometry. There are lots of things this does for us, but consider the following. If we had set up our ortho matrix to use a percentage based mapping, and we specified a panel as occupying the lower quarter of the screen (for a UI, let's say), and we specified a texture with the correct texture coordinates, then our UI would automagically be drawn correctly for any chosen window/screen size. Not exactly cold fusion, but it's one of many examples. Now that we have the texture working well, we have to get back to talking about transparency.
Transparency
As I said before, one easy way of adding transparency is to specify a color key value in the call to D3DXCreateTextureFromFileEx. Another is to use an image that actually has an alpha channel. Either way, specify a texture with some transparency (either with an alpha channel or a color key value) and run the app. You should see no difference. This is because alpha blending is not enabled. To enable alpha blending, add these lines to PostInitialize:
>g_pd3dDevice->SetRenderState(D3DRS_ALPHABLENDENABLE, TRUE);
>g_pd3dDevice->SetRenderState(D3DRS_SRCBLEND, D3DBLEND_SRCALPHA);
>g_pd3dDevice->SetRenderState(D3DRS_DESTBLEND, D3DBLEND_INVSRCALPHA);