[davidcoty@tx.rr.com]

Here is what I do. Select the layer, run the round corners tool. You should see "little ants" marking the round corners. Now go to "Select" on the top and click on "Invert". Then go to "Edit" and click on "cut". This will cut your layer with the rounded corners. Then you just go to "Layer", click on "Transparency" and then click on "color to alpha". This will let the layer under the one you cut with rounded corners to show through (it will make the areas around the corners transparent in the layer you cut). After you have your layer ready you can scale it to any measurements to fit your LO.
Let me know if this works! This is how I do it.