#4 Layer shape blur causes the shape to become rectangular?

What I did

1. I added an image that had a round shape by pulling the radius all the way to the middle.
2. I then added a button click to it by adding a circle shape.
3. I then added another circle and set it as the bottom layer, gave it fill and when I gave it offset and blur, the image radius went away and it showed a rectangle again.

What I expected

I wanted a red drop shadow on the button. You can't see it because its the bottom layer and its the same shape.

What happened instead

as soon as I touch the blur or shift controls, the circle turns into a square??? I can see the red blur circle underneath it.