Interesting method. Personally, I've been using a tool called Image Overlay Utility. It's extremely light weight and solves all the issues you had without workarounds.
You can use Num + and Num - to configure the transparency level and Num ✳ (asterisk) to configure it to invisible or visible. It supports positioning, click through, image scaling, command line, and even filters that can help by drawing the edges raw screenshots of the champ selection screen without editing/cutting (I have no experience with that. I still think it would just be better if you do it manually with a paint tool.)
Either way, both methods work. I just wanted to list this so people know there are alternatives.