using cs3 illustrator on a mac os x.
If I understand what you're asking correctly, I think all you need to do is create your rounded rectangle using the Rounded Rectangle Tool and then apply a pattern brush with the "dotted circle line." To create the pattern brush, simply use the Ellipse Tool to draw a circle/dot the same size as the dots that you want to make up your dotted line, then drag that circle/dot to the Brushes Palette. The New Brush dialog box will pop up when you do this. Select New Pattern Brush and click "OK." The Pattern Brush Option Dialog will pop up next. In the text box labeled Spacing, enter 100% (this will give you a space in between each dot equal to the same size as the dot). Also, if you want to be able to change the color of the dots, select Tints and Shades in the Methods drop-down under Colorization. (see attachment) Click "OK," and your new pattern brush should now appear in your Brushes Palette. All you have to do now is select your rounded rectangle with the Selection Tool and click on your new brush in the Brushes Palette to apply it.
If your dots are bigger or smaller than you wanted after you apply them, you can edit the size of the dots by double-clicking on your pattern brush in the Brushes Palette and modifying the value for Scale.
perfecto, works like a charm! thank you so much for your help!