Hi Belinda.  I'm no expert, but here's my best guess.

While in graphics mode, click the button along the top that says "show embroidery."  I'm going to guess that your embroidery disappears.  It's just a picture - don't freak - nothing is gone - you can turn it back on if you wish.  Same thing is available in Deco, except it says "show graphics."  These help if you're tracing or need the original to refer to for colors, shaping, etc. but they are not able to be manipulated.  They can be turned on, turned off, or deleted.

Go back to embroidery mode.  Select whatever parts (or select all) you want to convert to graphics.  Then convert.  Same thing is true when going from graphics to embroidery.  You must select whatever obects you wish to convert to stitches.

Hefty learning curve.  The dvds and videos help.  Hang in there!  julie