ā€ˇThanks for all who took the time to answer and help. I think I've just 
learned a couple of new things regarding alpha channel and how gimp works, 
and that now I'll be able to find some educated solution to my problem.

All the best,

Amit

> 
> The unfortunate answer is that it cannot be done; there is,  
> technically, a problem with anti-aliasing text over a transparent  
> background. GIF implements transparency by specifying a single color  
> in the colormap to be transparent. They (CompuServe?) could have  
> defined the GIF file format to treat a range of indexes in the palette  
> to represent varying levels of transparency, but they did not. There  
> is nothing the GIMP can do to overcome this limitation of the GIF  
> format.
> 
> The PNG format DOES support an alpha channel, even in Index Mode; so  
> you might see if that meets your needs.
> 
> One thing to note is that converting to Indexed Mode in the GIMP will  
> alias your layers even if the background of the image is not  
> transparent. However, if you remain in RGB Mode and let the GIF save  
> plug-in perform the Indexed conversion, the fonts will be anti-aliased  
> properly (alternately, you could Merge the layers or flatten the image  
> in RGB Mode and then convert the result to Indexed Mode).
> 
> It is not ideal that the GIMP assumes the transparency limitation of  
> the GIF format in its Indexed Mode editing but it is an understandably  
> low priority problem. Discussions continue on how best (or even  
> whether) to handle indexed images but it is unlikely that any changes  
> will occur in the near future.
> 
> 
> 
> 
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