Depends on your version of PS. The newer ones has a tool called Rounded Rectangle Tool (U) which can do just that.
Just hold down ctrl and then click on the layer. Then go to Select->Modify->Smooth, type in the pixels and click ok. You are done
I was just kidding Photshop is great. You got one FW user here though. However if you can get fireworks 8 and learn how to use it. I have also used Photshop. IMHO its better than photoshop.