Although I’m 99% sure the ATI manager software has this ability also, with the nView software by nVidia you can easily make your Windows XP taskbar transparent.
Here’s how it’s done:
1. Download and install the latest nVidia driver set.
2. Go to the Control Panel and double-click the NVIDIA nView Desktop Manager icon. See below for example.
3. Click the Effects tab, check Enable taskbar transparency, set the level desired, click Apply. See below for example.
..and that’s all there is to it. Ta-da.. transparent taskbar. For best effect, make sure to have a wallpaper that is an image of some kind (a pattern, photo, etc.) and not just a solid color.