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You can copy the sprite from paint then paste it into Photoshop. Then make a new document and it should have the exact dimensions of what you copied, then you use the magic wand tool to select the white background parts and press delete to remove them then save. I guess that's one way to remove them.
Yes, but how do you put in that "VS" Text? Can you give a source? (I'm learning Font editing, Spriting, World Map editing and making and hacking GBA ROMs at the same time xDDDD)