Hey Cathy,
Sorry I didn't chime in earlier myself (I've got ~6 skinning projects going right now so my forum-browsing time has become a bit limited as of late).
I basically started the same way, except I've tended to avoid Image Ready... that's just a personal quirk of mine.
When I start with a skin, I mockup the design in Photoshop then simply use the Copy Merged command and then paste them into a new file, Save For Web... etc etc... I've never liked slices, don't really know why...
So then I pop over into DW and start setting up my skin files, usually I follow a structure of:
\\devserver\website.com\XXX-skin
-skin.html
-skin.css
-skin.xml
--//-Optional-//--
-otherskin.html
-otherskin.css
-otherskin.xml
in the folder name XXX stands for a 3 letter acronym I use to designate the client, the optional files are just in case you need mulitple skin types included in one skin package (ie. one page that has an annoying flash banner for the header)
Then just setup the skin as you would any other template inside Dreamweaver. I've actually gone back to using tables for most my DNN skins.. yes I said tables... I have spent many hours trying to get a perfect CSS-based, properly deprecated, cross-browser friendly site only to have it all shattered with the addition of a module or some other change. So I went back to my caveman days and have been mocking up most my skins with tables (considering most of DNN and it's modules generate table-based data, it really seemed to be a waste to put that much effort into CSS unless that was one of the stated requirements of the site)...
Anyway... so got the tables laid out with the images in place, now we just add the tokens, [LOGIN] and [MENU] are your critical ones (you need to be able to get in and move around right?)... then just add your content areas... for this I use a snip of code from my personal code library:
<TABLE width="100%">
<TR>
<TD class="toppane" colspan="3" id="TopPane" runat="server" valign="top"></TD>
</TR>
<TR valign="top">
<TD class="leftpane" id="LeftPane" runat="server" valign="top"></TD>
<TD class="contentpane" id="ContentPane" runat="server" valign="top"></TD>
<TD class="rightpane" id="RightPane" runat="server" valign="top"></TD>
</TR>
<TR>
<TD class="bottompane" colspan="3" id="BottomPane" runat="server" valign="top"></TD>
</TR>
</TABLE>
This table gives you 5 Content areas, a top banner, 3 columns, and a lower banner. However you can break it down and just use bits and pieces, as long as you have a "ContentPane" set.
Once you have everything in place, just zip up your files to a XXX-skin-#.##.zip file and then upload it through the Host->Skins section. (One note, if you have nothing in your XML file, just leave it out, avoiding the panic of seeing an error when DNN parses the package). Now you can go in and start tweaking your CSS file live (another one of my preferences, not a requirement).
I hope this has made sense, it's getting near the end of the day and my brain is a bit of jelly at the moment.
One site I've recently rolled out can be seen at: http://www.parksidepediatrics.com .
Good Luck!
SB