flattening or merging- doesn't matter. A jpg is not capable of supporting transparency. A png. will, but most browsers arent' yet supporting the png format.
A gif will support if you use the correct settings in your save for web option. But there are more reasons than I can count to NOT choose gif as your format for photos. It's great for line art or clip art, but it does not support enough colors to have nice photos. That's why most web photos are jpg and gif is reserved for logos or few colored images.

The clipping path or the .eps is the most common choices. Luckies, if you want to pm me, I'll give you my email and you can email the file to me. I'll slip in the clipping path and you'll be set.