1. are you using FitalySkinLoad by Alexander Pruss? If not then you must download it (free) from palmgear.com. Unzip it and copy it to the Palm Quickload top section.
2. Run fitalyvirtualt3 again, selecting the Lifedrive option.
3. Go to C:\Program Files\Palm\\FitalyVirtual LifeDrive and DELETE the fitaly skin app that you find there. This is key!
4. I would suggest that you delete all fitaly and fitaly skin apps from your tx before going further. I did just to make sure that its a clean install.
5. Hotsync. Initially, you may still appear to have the same problem but you must soft reset and you should be ok.
I've done this myself just yesterday. You have to get the steps in the right order but it does come ok in the end.