Sprite Manager 2 distorted images

Ok so I've been using Unity and SM2 for about a month now and i continue trying to solve an issue with how my images show up. The original exported files for the images look clean and perfect, even when the atlases are generated they look fine if opened up, but once in the game view/scene view, on both the iPhone and inside the Unity editor, the images look distorted and you can see the edges of the cutout. For Example:

Here is what the atlas looks like when opened with Preview (on a mac).

And then once i make the Packed Sprite and all that heres how it looks like in the game.

I have tried playing around with the options and have looked through many forums and answers but nothing works! Heres the steps i do when using an image:

1. Draw it out on Illustrator in the size that i want it on my iPhone

2. I open it up on Photoshop and save it as a PNG, making sure to keep the right pixels

3. Drag it into Unity and do the following -Set Texture Type to Advanced -Non Power of 2 to None -Disable Generate Mip Maps -Wrap Mode to Clamp -Filter Mode to Point
   -Override for iPhone -Format to RGBA 32 bit

4. Then I Make a GameObject, add the Packed Sprite script

5. I add the material (Sprite/Vertex Colored, Fast) to the GameObject and in the sprite timeline put the images

6. Enable Pixel Perfect

7. Build the atlas with Padding = 0, Disable Trim Images, Enable Force Square, and Enable Scan Project Folder

When i press play with maximize, (Set to iPhone 4G wide(960x640)) its the right size but looks like the image i showed earlier.

The atlas looks fine and everything before it too but something is clearly wrong.

So main problem: -the images look distorted once in game view/iPhone -you can see the white outline of where the atlas cuts images

Please help and thank you for your time!