Am new to P&GD 2013.

Trying to photo merge as shown on page 98 of the manual and also in Help. This is to blurr the background.

A copy is made to the right, blurred and graduated transparency made.

But, whatever tried, the blurred image remains in the elliptical centre and not in the surrounding area, so if merged the main subject is blurred.
It needs a negative result to this, but can't achieve this.

Must be simple to most people here, so would appreciate your advice!