I am not sure about the blinkie, but as far as blending a photo into the BG: place your photo on top of whatever BG you want to use. Then, with the photo layer active, scroll through the Blend Modes on your layers palette. (I think you are using an older version of PS, so it should be roughly the same as my CS5.) Usually Overlay or Soft Light give good results, but you may find another that gives you the look you like. You can also play around with the opacity of your photo, in conjunction with a different blend mode.