Okay I changed the color of my mushrooms and then saved and all, and now everything my villagers carry has a white square background around it....what do I do?!

If you edit the carrying file, you must save it again as a .png file. It sounds like you saved it as a different file format, such as .bmp, which will save a white rectangular background around the images. The easiest way to recover is to restore the original file, either by downloading the one I provided in this post and following the instructions later in that thread, or by reinstalling Virtual Villagers.

It's saved as .png if it isn't it doesn't even show up in game..And when I go to the attached file to save it, it can only be saved as .bmp

If I reinstall will I have to start over with my village?

Your games will be fine as long as you reinstall Virtual Villagers from the same installer that you used to install it the first time.

It's odd that you don't have the option to save the file that I attached as anything but bmp. How are you downloading it?

I just reinstalled....

whenever i try to save a picture with internet explorer i can only save it as a bmp file. Also whenever I would edit a file for vv with paint i would end up with the white background. So i also had to reinstall vv a few weeks ago.