Philip,
I am just a beginner with Photoshop and am using V7.. But have found that the quick and dirty way would be to move the images onto the new canvas with the move tool.. thereby creating a layer for each image moved.. then select a layer and resize on the diagonal using the free transform tool while holding down the shift key to keep the perspective.. then place it where you want it.. then to fade the edges just use the eraser tool with a large soft brush at 100%opacity and flow with the airbrush turned on and just use the edge of the brush on the edges you want to knock out.. then to fade into the other picture just lower the opacity and flow down to 15% and 25% or whatever works for you and using half of the soft brush go around the areas you want to blend varying the opacity, flow, and brush size to suit..
Of course there are many other ways the pros use .. layer masks .. gradients.. etc.. but they will need to explain those..
Crude examples of just using the eraser are below..
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http://www.pixentral.com/show.php?picture=1c3oZZyjxj8Ed1JJfW x6Onf44MLr4d0> <
http://www.pixentral.com/show.php?picture=19hQvASIsXS9OQp0nc AWawlNtzDu5p>
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Old N Slow N Prefer Quick N Easy