I was unable to determine the cause of the problem. However, I was able to fix it by uninstalling all Premiere Elements 7 components and re-installing them. When asked, I chose the option to remove my settings as well as the application.
I have a feeling it was a customization setting I made. But I don't know what setting(s) might have prevented me from adding menu templates.
Glad that it's working. I cannot think of any customizitation that would cause this issue. I would *suspect* that it was a problem with the initial installation, or a corrupt Menu Template from that installation.
Do you happen to recall which Menu Template you were using? Did you try any others? You did have Chapter Markers set before you chose the Menu, didn't you? (This with Chapter selection sub-Menus).
PRE7 was working fine for a while. I mean, I used it several times to drag menu templates in and make menus for my DVD's before.
Then one day it just stopped working. I would drag the template just like I had done before many times, but it would not "drop." The mouse cursor changed to the "drop" cursor (with a square dotted-line box) but when I released the mouse, nothing would happen.
I even restarted thinking maybe I ran out of memory due to a memory leak or something. But no change.
The next step was uninstall/re-install and that did the trick.
I was dragging the normal built-in templates, nothing special, nothing fancy.
Unfortunately I am no longer using PRE7 I've switched to another product that I am much happier with. Sorry. I know how frustrating that is because I am a software developer myself and I always have to get to the bottom of every problem. But I no longer use this product I found a better one.