Perhaps I'm doing this wrong or haven't installed something. I am now on version K-Meleon 1.1.2.

I was previously on 0.9 and if I saw a url in a website I would simply hightlight the url with my mouse then click on the the "new layer" icon. Then the url would open in a new background layer.

Now in this version when I highlight the URL and click all I get is a new blank page.

Did I do something wrong, or is it somewhere in my preferences. If so where? I like it when links open in new background layers

You are not doing anything wrong. It's just that this "new layer" button feature that you know from 0.9 was removed in 1.0. Since then, the button simply opens a new layer.

When you want to open a highlighted URL, right-click it and choose "Open As URL". To configure where such URLs are opened, open Edit > Advanced Preferences (or hit F2). You are already in the right place (tab "General" under "Browsing Options"). Choose "Selected Text" from the drop-down list there and configure it to open where you desire.

Thanks again. Darn this new version is just great.