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Debbie
I also have a similar problem with PSP 8.1, however I have never been unable to select or deform, everything just freezes. For me it all depends on the size of the layout. The larger and higher resolution the layout is the slower it will be. One thing to check is your resolution. Make sure it is set to pixels/inch. I was working in mine recently and somehow it changed to pixels/cm which froze everything.
Are all of your tools locked or just your deform and select?
Hope you get it sorted out. The most layers I have had was around 25 and that was with an 8x10 300 dpi layout, and it never froze, and I only have 256 of RAM.
Sandy
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