Digitog
Welcome to the Apple Discussions.
Currently iPhoto is almost unusable, but possible to do some editing in main window if persistent.
You can set Photoshop (or any image editor) as an external editor in iPhoto. (Preferences -> General -> Edit Photo: Choose from the Drop Down Menu.) This way, when you double click a pic to edit in iPhoto it will open automatically in Photoshop or your Image Editor, and when you save it it's sent back to iPhoto automatically. This is the only way that edits made in another application will be displayed in iPhoto.
Using an external editor will allow you to keep working without the distortion issue until a fix is found.
In order of price here are some suggestions:
Seashore (free)
Graphic Coverter ($45 approx)
Acorn ($50 approx)
Photoshop Elements ($75 approx)
There are many, many other options. Search on
MacUpdate.
Regards
TD