This problem is in a thread started by Luis Sequeira in the mail list on 27 Feb 2007 but the thread ends with no solution. Is there any progress on this?
I replied to it. There was a problem in dvips. A new config.ps has been posted on a texlive page: http://tug.org/texlive/bugs.html
Thanks for the great work on powerdot, Bob
Thanks for the kind words, best, -Hendri.