Disregard, I figured it out
These are the settings:
These are the results:
The one thing you cannot do is drag and drop images - you have to "insert" an image object, then set it to the file in the skin directory
Ahh, works perfectly under compatibility mode.
I'm glad i can stay with Vista, i was just starting to really like it.
For anything that is giving you problems in Vista, do what 06TC lays out above. It will fix the issue 99% of the time. For anything that doesn't work in Vista no matter what, and you absolutely must have it, you have two choices if you don't want to get rid of Vista altogether: install XP on another partition of the HD and use a dual-boot app to have both of them, or, even easier, use Microsoft Virtual PC, and use XP as the OS on your Virtual PC.
this thread discusses what may need to be done.