Flash will automatically use JPEG compression on a PNG file you imported when it detects that it's suitable. Go to the properties of the image in the library and you'll see. Flash stores the alpha mask separately in a compressed form. On a 1000x1000 picture that I have (waist-up shot of a woman), the alpha mask takes up 12K, while the JPEG portion takes up 101K. The original PNG file was 843K. If you can trace out the alpha mask using curves, it's possible that you can beat the compression algorithm. It's probably not worth the effort. To reduce file size, I would focus on the JPEG compression level. Often you can get away with a lower number, like 40 or 50, especially if deblocking is turned on.