I suspect it has to do with the layer order. It looks like you are clipping the photo to the frame rather than putting it below the frame. Not all templates have a photo mask layer to clip the photo to. When I'm working with that type of frame, I just use a layer mask to make my photo fit within the frame.
- Select the area with the marquis tool - making sure the edges of your selection overlap the frame a bit so you won't get a gap.
- Make sure your photo layer is active and add a layer mask. The icon looks like a square with a circle inside.
I work in CS6, but I think the process is quite similar in PSE. Let us know if you need screenshots.
Is it too late to ask for those screenshots?
I just got home from helping out with a new grandbaby, but I can get you some screenshots tomorrow.