CS2 - Filter / Reduce Noise problem

I have Photoshop CS2 9.0.2 and I am seeing something odd about the Filter / Noise / Reduce Noise tool. It shows up best when you have, for example, a red balloon, with a distinct edge, against a simple blue sky. After I do a Reduce Noise operation there is an area around the balloon where the blue sky color is faintly polluted with red, like an ugly faint red halo around the balloon. The problem increases as the Reduce Color Noise setting is increased. Does anyone else see this? It really limits the usefulness of the tool because the halo effect is uglier than the noise grain problem as I was trying to tackle in the first place. Any suggestions?

Dell Inspiron 6000, XP Home SP2, 2G RAM

Create an edge mask and / or saturation mask before applying the filter, or work in separate color channels, would be my suggestion. Color spilling is 'normal' when cranking up color noise reduction.

Thanks Mathias. I will look into your suggestions.

Many masks can be applied. With Reduce Noise, I've had good results selecting just the shadows, either via Select>Color Range, or by ctrl-clicking the RGB channel and inversing selection before applying the filter selectively to the color channels.