After you add the code to your blog or website it should look something like the below (black code). All you need to do is delete the RGB section (hilighted in red) and add wmode='transparent' after "height" (hilighted in green below)
RGB=0x000000&feed=http%3A%2F%2Fpicasaweb.google.com%2Fdata%2Ffeed%2Fapi%2Fuser%2Faudacity.entertainment%2Falbumid%2F5317873938522797265%3Falt%3Drss%26kind%3Dphoto%26hl%3Den_US" pluginspage="http://www.macromedia.com/go/getflashplayer">
This is an example of actual code that i use in one of my sites.
"application/x-shockwave-flash" src="http://picasaweb.google.com/s/c/bin/
slideshow.swf" width="780" height="533" wmode="transparent" flashvars="host=picasaweb
.google.com&interval=5&captions=1&hl=en_US&feat=flashalbum&feed=h
ttp%3A%2F%2Fpicasaweb.google.com%2Fdata%2Ffeed%2Fapi%2Fuser%2Faudacity.entertainment%
2Falbumid%2F5317873938522797265%3Falt%3Drss%26kind%3Dphoto%26hl%3Den_US" pluginspage=
"http://www.macromedia.com/go/getflashplayer">
Another small tweak that i have made to this code is defined the number of seconds between
photos by adding "interval" (hi-lighted in yellow).
Good luck!