If you have Photoshop CS + it is easy to get rounded corners. You select the rounded rectangle tool, set your feathering in the top dialog box, and click anti-alias.
Well, if you have Photoshop 7 like I do, getting the anti-aliased rounded corners requires and extra step.
So I found a little tutorial here--
If you aren't doing a texture fill, after you do the steps in the tutorial, just add a new layer, and then use the paint bucket to fill in your selection.