Hmmm... rechecked blur transparency settings once again and confirmed that they were all turned off, then reset and re-apply... still had problem.
Reinstalled and repeated blur/transparency options, and now it works perfectly! 
Big thank you to all of the community for help with this bizarre little issue, especially (in order of appearance)
2of3
DigitalCHET
vStyler
voidcore
If you guys have any skins you've done, I'd be glad to check them out and promote your work on my machine! Thanks again.
EDIT: Wow, I just realized, you are THE vStyler who made Vienna Rapture, one of my all-time favourites. And Voidcore, maker of Anonymity, which I use now on my XP machine. I am honoured to have had your advice and support! I feel like I just got some free punching advice from Manny Pacquiao and Ricky Hatton! BTW, @voidcore, your skin goes AWESOME with "Inducer" winamp skin in windowshade mode from skinconsortium.com. Thought you might want to check it out, it's pretty hot.