SetLayeredWindowAttributes not working on Windows 7

Question

I am using SetLayeredWindowAttributer to make a particular color of layered window transparent.

This works fine on Windows XP,VISTA . But when I use the same on Windows 7 its not working.

SetLayeredWindowAttributes(hWnd, RGB(0xff,0xff,0xff), 0, LWA_COLORKEY);

When I use LWA_ALPHA then also it works. Problem is that I am not able to make a particular color transparent in Windows 7.

The following statement works on Windows 7

SetLayeredWindowAttributes(hWnd,RGB(0xff,0xff,0xff), 100, LWA_ALPHA);

Is it possible that the rendered color values not matching the color value in SetLayeredWindowAttributes?