Creating a .png file in a specific format

[osimp]

I'm working with Photoshop 7.0 on a PPC MAC.

Starting with nothing, I wish to create a .png (or other) file which, when opened, is a circular image containing a single letter. The color within the
circle should be settable, and the color of the letter should be settable. There should be nothing outside the circle.

I'm familiar with most of the tools in PS, but haven't been able to accomplish this.

Thanks in advance.

>> I should mention that I have no problem whatsoever making this file in a square format.

[osimp]

Thanks, but you can ignore this -- I figured out how to do it.

[iDad]

remove the background, it will take on the round shape but all images will take on a straight edge for the frame.