helgoboss made a Ken Burns effect type script for still images....
http://forum.cockos.com/showthread.php?t=161121
I don't have an issue with png images (or gifs etc) going offline and being irretrievable. One thing to watch out for is that the Insert->Media file dialogue does not have images as the file types it searches for, so in the dropdown that says "All Supported Media Files", change to "All Files (*.*)".
If you want fades on the photo items to visually fade them, insert the Video Processor effect and select the "Item fades affect video". Then choose more video processor effects and automate them like you would any other.