From: Daniel Piechnick
Hi Spazzest :) Make sure you have the correct layer (the one with the circle on it) selected. If that's not the problem, I'm not sure what's happening. You can email me the psd file of your button if you're really keen. :) This transformation method is just a shortcut to making the button shape. If you like, you can just select a rectangular area, as tall as the circle, and fill it with the Paint Bucket Tool.