here is the known issue strait from Stardock in there words "Version 3.3 and below of WindowBlinds have some compatibility issues with Photoshop 7. We are working on those. In the meantime, you will want to exclude it from being skinned. To do this, go to the WindowBlinds settings and go to the Per Application settings. Drag the pointer to Photoshop to exclude it."
http://www.windowblinds.net/default.asp?page=wbfaq
