Here is the image: 
It seem to be working fine in Eclipse, i.e. button is resized as expected and black bars are not shown. However in the emulator it shows up with black bars and stretched.
Image is saved as <name>.9.png. I am using API 10 for both IDE and emulator.
Any clues to what might be the problem?
The 1 px boarder needs to be either black or transparent. It looks like the left hand boarder is black and not transparent.