The nose art has to be a bmp (bitmap), 64 x 64 and only 256 colors. Once created, put it into your "squads" folder. Make sure the name of the file is the same as your game id (for instance, my quad logo is BLAMM0.bmp). Then, log onto the game and go to O' Club, Squads and choose "Upload Nose Art" (or whatever that button is called).
Let me know if you need more help.
By the way, 176, 176, 176 is the transparent color.