Gail, I think that if the paper backing is that difficult to get off, you have a bad batch of Printed Treasures and should contact the company for a replacement. (I don't know if they actually will replace it, but I would certainly try! There is no excuse for having to soak and scrape the paper off, IMHO.)
As far as whether to upgrade Photoshop Elements... Adobe comes out with updates once a year around the September. I personally like to update every other year (unless I'm taping videos and need the latest and greatest.
If I were you, I'd wait until version 9 is announced and then upgrade to that.
Any chance you could upload your fabric panel to the Printing on Fabric class gallery? (http://www.thequiltshow.com/os/classes. ... r/jeaniesa
) I'd love to see it!