Ok, this appears to be a totally weird bug:
I was needing to add new layers and got annoyed by having to move the mouse down to the bottom to click the button all the time (why is it down there? move it up please)
So I thought I'd undock the palette and make it shorter - less space to move.
However, it doesn't work when the palette is undocked!
What happens is:
If the Layers Palette is docked to the side of the screen, I click the "New Layer" button and can chose a layer from the menu.
If the Layers Palette IS NOT docked , I click the "New Layer" button but in the menu that shows up "New Raster Layer" and "New Vector Layer" becomes unselected a split second after the menu has displayed.
Ie, I can't actually select "New Raster layer"
Is this a known bug?