Hello. I am trying to figure out how to fix the jaggedness of the inside of the circlular cut out in this icon:

Image hosted by Photobucket.com (icon by me)

(Please don't take it -- it's not done yet!)

I'm using PS CS. I've tried to go in and delete individual pixels but ... still looked jagged. I tried to blur the circle and use a border to cover it up, but it still didn't look right. I've seen nice clean circle cut outs in icons before so I know it's possible, I just don't know how. It just looks too pixelated.

ETA: Question answered. You guys rock. Thanks.