IPhoto '08 (7.0.1) has scambled some of my albums

Question

I upgraded my existing iPhoto album from the '06 version to the new '08 version. In doing so, a few strange things happened.
I have about 2200 photos and most of them were already organizaed into albums under iPhoto '06. I was going through some of my albums and noticed that, while all the thumbnails appear in the correct albums, when I click the albums to view the larger image, instead I get a giant (and very blurry) grey spot with an exclamation point on it.
I was worried that iLife had somehow corrupted the photos or lost them completely. Turns out if I look at the name of the photo image (the name in the filesystem), and then do a Spotlight search for the file, these images are all found -- but NOT in the albums where they are supposed to be.
Something about the upload seems to have relocated some of the photos. I haven't gone through everything to find out how many are misplaced.
Does anyone know of a way to get iPhoto to validate the library and correct this? I considered attempting to manually move the files around in the hidden filesystem below iPhoto... but I'm not sure how iPhoto will react to this.

Answer 1

I called AppleCare and they walked me through the rebuild. There are several options... and they wanted me to select all rebuild options. It took about 8 minutes to do my library (of about 2100 photos).
Unfortunately it didn't correct the problem.
Upon re-opening iPhoto, the same "lost" photos were still lost. Thumbnails showed up in the correct albums where I put them, but the full-size versions of the pictures couldn't be found (and were still in the wrong folder).
iPhoto 7 ('08) defines the iPhoto Library as a 'Package' on the Mac -- which hides the actual structure of the filesystem below the package name. This (hopefully) keeps users from messing with it. BUT... by right-clicking the package name, there's an option to 'show package contents' and it's possible to see how it's organized things. (A word to the wise: NEVER attempt to manually move files or photos around inside the iPhoto Library -- let iPhoto manage this library itself).
I'd say the 'library' is partially corrupt, but the files are fine. E.g. once Spotlight shows me where a picture is located, I can open these pictures and it opens with no problem. The problem seems to be iPhoto confusion in that I originally put photos into albums as usual, but a few of them ended up having their full-sized images moved to different albums even though the thumbnails were still in the original albums and the meta-data was telling iPhoto that the photos were still present, when they were not.
The rebuild completed by didn't correct the problem, but since I had taken a good backup the day before doing the upgrade, we quit iPhoto, drug the iPhoto '08 library to the trash, restored the backup, then started iPhoto and allowed it to 'upgrade' the library again.
After restoring the backup & re-upgrading the library again, it seems to have worked. I am unable to find any other corruption and all seems well.
None of the missing photos were pictures that I had played with since upgrading. I had done some re-organizing of 'events' by splitting some events apart (when I could clearly see pictures together that were taken at different real-life activities) and also merged some events back together (e.g. pictures taken on just one vacation would appear as many events because each import from the camera is assumed to be a different event). I don't know if the manipulation of "events" could have caused the problem with Albums.
For now, it's working, I have the original backup (which I'll never delete), and I'll keep an eye on iPhoto and hope this doesn't occur again.