Hi - I'm happy to help with your Mac issue. Please remember to Accept when we are completely finished and you are satisfied with my answer. Make sure iPhoto is closed. Goto your Application/Utilities folder and start Disk Utility. Click on the Macintosh HD icon on the left once. Select Repair Disk Permissions on the right side. Let it do it's thing - may take a while. Ignore all the messages you see. When finished, quit Disk Utility and then restart iPhoto. Let me know if the error reoccurs and we'll take the next step. Otherwise, this may very well fix your problem.
Have been away Mike but have just tried your solution and it worked, thank you. Someone made a comment that this could be repaired in the next os version, but hey you did it. Thankyou