Hi. I'm using Photoshop CS2. I'm having some trouble when I go to add text (but only sometimes, it's weird)

When I'm working on an image and I'm ready to add text. I flatten it (merged, whatever) and I click the "T" and the spot I want to add it to..

I go to type and nothing happens. Well it does but very very very small. I can even set it to a huge size and it'll still be small. The layer comes up and shows that my lettering is being added but you can't see anything because it's literally 1 pt size. 

I'm guessing I'm not doing something right when I'm done with the image, right before I go to add text. 

Anyone know what this problem could be? Sorry If I'm not clear enough.