When creating a new document, select "transparent background". This gives you the checkerboard.

I have PSE4, but it should be the same for working with templates. For using the shapes, place your photo or paper layer above the PNG shape in the layers palette. With the photo/paper layer selected, go CTRL+G to group them together. You can still move the photo/paper around, but it will only show up in the area of the PNG.

Good luck, and let us know how you make out.

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Colleen in Friendly Manitoba...
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