Cant get Image Converter to work ? What do the transparency options mean ?

Just FYI, I'd recommend you use https://www.espruino.com/Image+Converter rather than the one in espruinotools, but both should work ok.

• 1 bpp stores the image as 1bpp, but without color
  
• Optimal 1 bpp stores the image as 1bpp, but with a color palette which I think is what you were after
  
  

But for what you're actually doing, you're better with 1 bpp as @joyrider3774 says (just ensure the graphic itself is white, not black). Then, you can just use one image and g.setColor to adjust its color