which version of illustrator and indesign are you using? i would first try checking the show import option when placing the file or the transparent background options when placing an .ai file.

also what format of photoshop are the people in? you might have to try saving them in either .psd or .eps before placing them in Illustrator.

You're placing the people incorrectly in Illustrator. The way I do it (maybe not the easiest) is to place the photoshop file (not jpg or tif) of the cut-out person w/ a background layer and when you place it Illustrator will ask you if you want to place the layers as objects, click yes. Then just delete the background layer and the person is left without the white background. I think you can import it as a .gif too but I do it the other way.

herz - but does it print correctly? (to a postscript printer). the white background around the people may (hopefully) be just an artifact of the process that's creating the preview you're seeing in InDesign. i hope that makes sense.
to put it another way: when InDesign reads the .AI files (while importing it or placing it), it's probably doing a quick and dirty interpretation; converting the combined vector and raster info of the AI file to an all-raster image. this quick and dirty preview should be good enough to accurately place the AI file where you want it in InDesign but may not reflect the way it will actually print.
if your printer doesn't have built-in adobe postscript, you may be fucked. you could test it by saving or exporting the InDesign file as a PDF. the resulting PDF file should show you how it will actually look if printed to a postscript printer. of course, once you've made a PDF you should be able to print to any printer you like (postscript or not) and get results that match what you see on screen in Acrobat.

thanks for all the replies...it turns out Mission St. was right. It is just a display issue.

kewl!
paul (petrunia), does this mean i'm now allowed one totally frivolous post on archinect? ;P