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When I try to add the photoshop button it says "Cannot place file named 'button.psd'. Unsupported Color Space. Re-Save Image As RGB or Grayscale."
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Certainly your PSD is in CMYK colour space. You can easily see this by opening the image in Photoshop and look at the title of the umage's window. If so, convert your image to RGB.
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Well, it very much means what it says - something is not right with your PSD. Without any info on teh actual document, its color mode, possible color profiles and so on nobody realyl can tell you more than that.
Mylenium
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Certainly your PSD is in CMYK colour space. You can easily see this by opening the image in Photoshop and look at the title of the umage's window. If so, convert your image to RGB.