did one of the windows updates remove this feature? I looked in the colors section, and I couldn't find this option. I found transparency effects which seems to shade the color used, but it doesn't make the taskbar transparent.

No idea, but you can easily get it back by installing classic shell.
Glass8 even, if you want aero at all. It's donationware, but for a few bucks and a bunch of keys, it's worth it.