Problem importing PSD or PNG with transparent background

I am using eLearning Suite 2. (CP5 Photoshop CS5)
I am trying to import a PSD or PNG. I am using it as part of a master slide.  It is a simple shape, with a transparent background containing a gradient overlay, inner shadow, bevel and emboss.  When imported, it appears correctly in the design area of Captivate.  However, when viewed in the browser, it acts as if it is an animation and I get what looks like a red color bar spectrum.  I have tried to flatten the layers and I still have the problem.  When I save it as a .JPG, it works fine.  However, as a PSD or PNG, it is a problem.  Seems like captivate may be having trouble rendering the gradient or transparent background.  Anyone else run into this issue?
Files below:
CPTX File:  http://coventry.mzinga.com/content/ss/temp/WCMS.cptx
PSD File: http://coventry.mzinga.com/content/ss/temp/bottom_wave.psd
Thanks,
Eric

So, I thought it might have something to do with the "effects" settings in Photoshop.  HOWEVER, I took a regular photo, cut out a part, and put it on a tranparent background.  This file as both a png and PSD have a halo that fades in and fades out.   I checked timing and I have it set to no transition for the item and show for rest of slide.  I did not have this  issue prior to upgrading from 4.  Hmmmm.
Eric

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