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PS Express isn't bad. It just might not be what you need (plus I'm not sure if PS Express can expressly save PNGs with transparency). I'm pretty sure Photoshop Mix can.
In order to create a PNG with transparency, the background of the overall composition should be transparent. (The classic gray and white checkerboard pattern indicates this.) The comp is then exported with the transparency option when saving as a PNG.
Try to work within the target size, if possible. Resizing down usually isn't an issue so I'm not sure why it would look worse.
I can manipulate the image in Mix as you suggested! The only thing I'm getting hung up on is the image somehow losing fidelity (not sure if that's the proper term here) when attempting to squeeze it into the 128x128.
And since this was drawn for me without the transparency set from the beginning, can it be applied afterwords? I guess I'm not understanding how to get the image within the composition to be a "sticker"
(Is there anyway to attach photos from mobile?)
Going from memory with Photoshop Mix, I'm pretty sure you can erase whatever you don't want and have that saved with transparency but I believe that has to saved (or sent) to Photoshop in order to save the transparency. I think Mix saves files locally as JPEGs (which doesn't have transparency).
Good memory! Only thing is, when going from Mix to Photoshop it looses its "sharpness" and looks of less quality.