You're not understanding how controls work. "Transparent" isn't transparent. All it does is tell the control to inherit the background properties of the contain that the control is sitting it. You cannot put a "Transparent" label control over a PictureBox and expect to see the image in the PictureBox. It doesn't work that way.
The is because when a control is rendered on screen it "owns" the pixels that the control covers. Other controls cannot render themselves into pixels that they don't own. That's why you can't see any controls "through" another control on top of it.
There is, however, ways around that.
See
this article[
^] for an example on how to create a new control to get around this problem.
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