Ok, I found an old shareware version and have figured it out for you.
In your screenshots you had no Layer Palette. You'll need to open this.
To open the Layer Palette, choose the View menu, then the last item called 'Toolbars'
This will show a new dialog. Make sure that 'Layer Palette' has a check in the box next to it. It should be the 3rd item from the bottom.
Then click close. There should be a new floating window call Layer Palette. In order to make it visible all the time, you'll have to click the button that looks like a triangle facing a line.
You should now have a Layer Palette that looks like:
You can now either create a new layer the way you've done before, or click the New Layer button in the Layer Palette window:
Name the layer using a special keyword from the Layer Reference Chart ->
http://xion.r2.com.au/index.php?page=layerref
For example, we want to make a play button. So we'll call the layer play, as you can see in the screenshot:
Ok, so now you've created a play layer. The problem being though, is that this layer is currently blank!
Make sure that the play layer is highlighted and selected. Just click on the name once and it should highlight.
As a test, use the rectangle selection, and select a small area on your skin, then, making sure that the play layer is till selected in the Layer Palette, choose the Flood Fill tool and click inside the rectangle you made:
Now if you save this as a PSD and drag into Xion, pressing on that coloured box will make Xion play.
You'll have to create new layers for the other buttons that you want.
If you want to use some of the image underneath, select it with the selection rectangle, then from the Edit menu, choose Copy, and then Paste->As new layer
You can then rename this layer in the Layer Palette to something like 'stop'. (without the surrounding ' )
Good luck!
Cliff