Paint.NET v3.31

Paint.NET is free image editing and photo manipulation software designed to be used on computers that run Windows. It supports layers, unlimited undo, special effects, and a wide variety of useful and powerful tools. It started development as an undergraduate college senior design project mentored by Microsoft, and is currently being maintained by some of the alumni that originally worked on it. Originally intended as a free replacement for the MS Paint software that comes with Windows, it has grown into a powerful yet simple tool for photo and image editing.

Download: Paint.NET v3.31 | 1.6 MB (Freeware)
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The Gimp is a good software, but it's more on the lines of Photoshop. Like Paint.NET falls in the same category of the simple Paintbrush.

I couldn't find ways to outline text or create (or even properly work with) images with a transparent background.

Paint.NET is ok, but you may find that despite its horrid interface and name, The Gimp may be a more feature-rich image editing tool that you may want to use.