This button uses Xara’s powerful transparency abilities. To begin, draw a square and four rectangles for edges (Snap To Grid makes this a snap). Convert the outside rectangles to Editable Shapes. Use the Shape tool to mitre the corners. Fill the center square with a Linear from white to black as shown with the blue arrow. Repeat this fill on all four beveled edges. Add a graphic of your choice. Select the center square and all four sides and apply a Flat Transparency, 50%.(From the Transparency section of the Control Bar.)
If you plan to use your button on a web site use this trick. Fill a square the same size as the button with the same background image. Add a solid background to a slightly larger square behind the button which you can later make transparent. When the button appears over your background pattern it will look transparent.