If your layers don't show up in the right order, just go to the layers palette, click on the layer that is in the wrong position and drag it to where you want it. It might be easier if you make the palette a little larger for this (as in longer).
Just think like you're doing paper. What's on top of the list is what's on top of your layout. If I'm thinking too simple because you do get this, just ignore me, but I got the feeling that this was the problem.

What I usually do before I insert a photo or paper, is that I select the layer in the template that I want to work on first. Then insert the photo or paper and it shows up on top of the layer that you just selected. (If it's not the top layer, you might have to scroll down the layers palette to see it). Then select that layer again, use the magic wand to make your selection, invert, go to your photo or paper and hit delete. Then undo your selection and start over again on a new layer.

Just one more note; you can only hit delete to remove the selection when you are working on a raster layer. If it's a background layer, you need to promote it to a raster layer first.

Good luck!

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Iris
Ayya Creative Designs