THANK YOU for mentioning the Photoshop problem here. I just got the dreaded "unreadable" error for the first time ever. I've been using Final Cut Express (FCE) for the past 2 years on this machine (and Final Cut Pro for 2 years on another machine before then) and never encountered something like this. Turns out, yesterday I imported a layered Photoshop file into my project for the first time, and it was working fine all afternoon, behaving well as a nested sequence, until I tried to re-open the project this morning after shutting down for the night. Thank goodness for the autosave vault, which had autosaved a version just prior to my adding the Photoshop stuff.
This is a shameful bug -- allowing you to work with imported files just fine until you restart, then boom, no access to your project? Puleese, Apple! My heart bleeds for all the poor souls who have missed deadlines and wasted weeks of work because of this. I feel like I've dodged a bullet. Guess the lesson is to save a
differently-named version of your project before you do something "new". (And no, I didn't rasterize or correctly size the images before importing into FCE because I didn't think it mattered -- and it "worked" at the time.)