I managed to use the 'fuzzy' tool to remove the slightly off white background. However, I want the shape itself to change. For instance, when I drop shadow on the image the shadow is rectangular on the previous outline, of the jpg, not the new rectangular shape. Also, Layers underneath are not visible where I just used the fuzzy tool to remove the background.
I guess using the fuzzy tool and pressing delete just gives a white background on the selected region? I want it to completely remove the background and make it transparent, how do I do that?