I have 3.5 R3, how do I make an object transparent so I can see the ref. image behind it?
You need to apply the reference image to a plane-type SubTool. Then turn on Transp and turn off Ghost. (Both are on the side shelf, to the right of the canvas.)
ZBrush 3.5 includes the ImagePlaneX tool, which is ideal for this purpose since it lets you work with two reference images at once – front and side views.