I'm not sure how to do that, but everything is highlighted except Layer Content Options, Type, Simplify Layer and Arrange. When I try to add a photo to a template the photo automatically goes to the center of the screen even though I have clicked on the layer of the template I want the photo to go into. I used this method before in version 6 and had no problems with it.
OK, now that you've figured out how to capture the screen , we need to see your Layers Palette.
Basically, what you're noticing is because an appropriate layer is not selected in the Layers Palette.
Yep, it's just as I said -- that "bree2nd.jpg" layer can't be simplified because it's already a pixel layer. In other words, there's nothing on that layer (either an effect or a vector shape) that can be rasterized (converted to simple pixels).
I don't understand why not, when I have done this several times in the past. You have to simplify the layer to group with a previous shape layer in order to hide the edges of the photo layer. Is there a different way to do this in version 10?