You've got the wrong colour for a background. Only certain colours appear transparent around charsets; you don't have one of those colours for a background and it's appearing in blocks.. Get a charset from the RTP and open it in paint. Open your monster charset and copy a chunk of the background from the RTP onto your custom and you'll see the difference. The n just use that colour as your background for the entire background.
As for flicking between the hero/monster, are you sure you checked the Animations 2 tab and are sure all the animations are f the monster; you didn't leave one or two as the hero? Although if you didn't want to monster to replace the hero, just put the monster in a new slot and build him from scratch.....
You can download charset/chipsets from dozens of sites; google it, although charasproject.net is good. AThis site isn't too bad for getting resources too, but you'll usually have to ask and wait around for it to be created, so that depends on your patience. For custom making, personally, I use MS Paint to make my stuff. I think that works as good as any other, but you need to play about with it sometimes to get them lined up correctly.
Either way, all the best!
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