Adobe PHOTOSHOP ELEMENTS 2 User Manual page 63

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Consequently, before converting images, it's best
to do the following:
Edit as much as possible in RGB mode.
Save a backup copy before converting. Be sure to
save a copy of your image that includes all layers
in order to edit the original version of the image
after the conversion.
Flatten the file before converting it. The inter-
action of colors between layer blending modes
will change when the mode changes.
ADOBE PHOTOSHOP ELEMENTS 2.0
To convert an image to another mode:
Choose Image > Mode, and choose the mode you
want from the submenu. Modes not available for
the active image appear dimmed in the menu.
Note: Images are flattened when you convert them to
Bitmap or Indexed Color mode, because these modes
do not support layers.
For more information, see "Converting
between Grayscale and Bitmap modes" in
online Help.
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