HELP!

Okay...so I'm working on making an icon using this tutorial but I don't want pink anymore. So I made a gradient in a shade of blue I like and everything is going fine. Then I go to the last step of making the border...I make a new layer, fill it with a solid color and then make a box and choose to cut it out...but nothing at all happens...nothing is cut out...the layer of color just sits there.

I also noticed that the forground color in the tools menu changes to grey.

Here is a what my screen in Photoshop 6.0 looks like.

Thanks for your help.