TrueType Fonts and Truecolor Images
Unfortunately the current GD-2.0.1 has a bug which prevents truetype fonts from being anti-aliased correctly on truecolor images. This is fixed in GD-2.0.2 which unfortunatelyt doesn't exist. As of PHP 4.3 we have bundled GD2 with PHP and fixed this and many other bugs.

Compare these two:

With alpha blending
<?
$im  = ImageCreateTruecolor(720,180);
ImageAlphaBlending($im,$blend);
ImageFilledRectangle($im,0,0,719,179,0x00ffffff);
ImageTTFText($im,80,0,10,135,0x00000000,
  "Garabd","ABCdef123");
Header('Content-Type: image/png');
ImagePNG($im);
?>
Output
If we turn off alpha blending or use a negative color index we get:

Without alpha blending
If we zoom in on the 'A' we can really see the anti-aliasing at work: