Index Layer?

Id like to do the same thing as squibbles...
select the X Box (in this case the hat) only. The image has alot of white but what REALLY throws me off is the abscence of channels and other options on this image.
So being that this is way beyond me....

members.home.net/rtbnj/santahat.htm

Please help,

Ryan

IMAGE>MODE>
change it from "indexed" to "RGB"

This will come in handy now that i realise it.....
I used the threshold on the blue channel to make my selection. Why is the white in the selection now yellow?

Thanks.....

Ryan