Check your editor preferences: Edit -> Preferences -> General
Make sure Allow Floating Documents in Full Edit Mode is checked
In the editor, go to Windows -> Images and select Float in Window
That should get rid of the grey border,
If you watch the cursor, when you hold the space bar down, the cursor should change to a hand. If the image is larger than the screen, using the space bar enables you to move the image around to see the parts outside of the window - works with many tools. This is useful when zoomed in for editing and you want to move slightly.
Hope that all makes sense.
Many thanks, Brian. I tried that and the grey border has disappeared.
Thanks, too, for explaining what happens when holding down the space bar. I can see it now. Last night it was driving me crazy! I appreciate the help.
I hope you get to enjoy using Photoshop Elements - if you do ever get stuck then this is the place to come. There are many experts around who will surely be able to help you.
I don't have a trackerball but have a look at the controls for it, sometimes there is a way to do a click and hold so that you don't have to hold the button down while moving the trackerball.