I am trying to make a text image to put on a dark t-shirt. I opened a new file, chose transparent for the background, and used the text tool to enter in my text. The image still appears to have a transparent background. When I go to save it as a PNG, it requires me to "flatten image" first, otherwise I can only save it is a photoshop document. As soon as I flatten image, the background appears white. When I try to put that file on a shirt, the preview shows mt text on top of a white box. Please help!

Thanks in advance,

--jodi

PS: I know I have an ancient version of Photoshop.

Yup too ancient to do what you want. Photoshop 5.5 was the first version that could handle transparent PNG. Look at the folders in the graphics forum for software recommendations.
http://tutortanith.com/resources2.htm#applications