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Does anyone know of a transfer paper for inkjet that works best? I have tried a few and they all seem to have either a white outline on them or a gluey outline.
As Joe mentioned, Jet Pro SofStretch (often referred to hear as JPSS) seems to be one of the current best transfer papers on the market.

There's some good information on this paper here:
jpss related topics at T-Shirt Forums

However, all transfer papers will have a white outline around the graphic or that gluey type residue (polymer window) where the image is not. JPSS minimizes that.

To really avoid that gluey type boxy look, you need to just trim your printed inkjet paper around your design before you press it to the t-shirt.

You can either trim it with scissors, a razor, or use a vinyl cutter/plotter with an optical eye that will do the trimming for you. The vinyl cutter can also add another aspect to your heat transfer business by adding the ability to do t-shirt vinyl and signs.

Here's a video that shows a vinyl cutter trimming an inkjet transfer paper:

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