Hi Wesley,

Let me briefly explain how does it work.

1. The "selection area" that plug-ins refer to is the path of the shape that you use to apply Live Effect to. There is also another way to set the selection area. It may be taken as well from the object transparency. So that the 100% transparent areas are used as not selected and all others as selected. Second way is the only way to set selection in XPE.

Although, not all plug-ins may work correctly with this selections concept, most of them do together with all Alien Skin effects.

2. The image expansion area has a fixed size for all plug-ins. But Alien Skin plug-ins has capability to adjust it automatically in case it is needed. This feature is present in XPE but is currently disabled due to some doubts about its stability. I believe it will be enabled soon in next updates.

I hope that will help you a bit.
If you have some more questions, go ahead! :-)