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I'm assuming you can do this in elements, if not we'll go another route.. Let me know if i need to clarify anything..
Assuming you have the picture in a separate layer above the background...
1) Open the canvas up to fullscreen, so you have a lot of grey around the picture, you may need to zoom out to do this
2) Select the eraser tool, and pick the largest feathered brush you can
3) Select the layer with the Picture and in the gray area (not in the actual picture, outside of it) click and slowly move in towards the picture. You should see the edge start to disappear faintly, showing the background layer.
If too much disappears, use a smaller eraser brush. If not enough, move closer to the picture
Make sense?
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