You’ve applied a Corner Effect to a frame, but now you want to edit the path slightly with the Direct Selection tool.

Unfortunately, the Corner Effects don’t actually place editable points on your frame; they just simulate the rounded corners or inverse corners (or whatever effect you’ve applied).

The Pathfinder palette to the rescue! In CS2, simply open the Pathfinder palette (Window > Object & Layout > Pathfinder), select the frame, and click the Open Path or the Close Path button. The corner effects suddenly get converted to real Bezier points!