I have a large transparent png in my scene that seem to block hotspots (even though the area over the hotspot is transparent). Setting the hotspot z-value negative (i.e. closer to cam) works, but is there another way to do this? e.g. for transparent pngs not to block hotspots? Thanks.
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An object in the scene should only block Hotspots if it has a Collider on the Default layer. Is this the case with your PNG?
I have an NPC object, which has a circle collider 2d (not sure if that was AC default or I put that there), with a sprite object attached. The sprite object is where I placed the Animator, and Box Collider 2d.
In this case, should the box collider be on the NPC object, and not sprite?
NPC

Sprite (layer: Default)

The two colliders are added by AC's Character wizard, and serve different purposes.
The Circle Collider on the root is used for pathfinding, and preventing other Characters from moving through it.
The Box Collider on the sprite is for making their Hotspot clickable. If you don't want the NPC to be interactive, you can remove this, but it's on the correct object if you do.
In this case though because the sprite object is on the default layer and has a collider, that's why it's blocking hotspots?
That's correct. The NPC is set up like this by default because it itself is a Hotspot, but this is optional.