When we did the original game the sprites were for the most part quite old school and were drawn in 8bit with no alpha channel data. Not bad but the iPhone has nice transparency effects we can use, so why not use them?
Here's a Binscee Droid before, during and after a little bit of subtle editing...
I've highlighted the transparent liquid bit.
Cut out the area that needs to be transparent and set it at 80% so it's still mostly green.
Next I paste this back into the original frame and the sprite frame is now complete.Ta Da!
Taking this image into an editor you will see that the liquid is indeed transparent which should look quite nice when it's in situ.
Here's the original animated 8bit version...