Editing skins with designer can be frustrating due to the many quirks in the process.
For a good starting point read here - http://www.sharepointblogs.com/tigirry/archive/2007/07/27/easy-way-of-editing-customized-theme-in-moss-2007.aspx
Some additional tips.
After you edit CSS files don't swich themes until you copy all your changes back to the theme.css file in the 12 hive otherwise SharePoint will overwrite your changes.
Every time you change themes SharePoint puts a local copy of the theme folder copied from the 12 hive which overwrites the current themes folder.
Only 1 theme folder per site collection appears in Designer.
Also as an extra note in the Masterpage section of sesttings, the system Masterpage option is used for the document center masterpage.
It appears the difference between the SIte Master Page and System Master page is primarily the quick launch. Which becomes the treeview in the System Page.