Hi Unity!
First let me point you at the
Distracting Backgrounds tutorial which talks about how to use the magnetic lasso to extract an image from it's background. I'm not sure if everything is the same for PSE1.1 or not but it's worth a try.
Honestly it sounds like you have the magnetic Lasso part figured out. It could be that you're working on the original photo file itself and then the image maybe a locked background. You could use the magnetic lasso to select the portion of the image you want then copy (
CRTL+C). Open a new image using the default size and paste (
CRTL+V). I'm suggesting this way so you don't accidentally overwrite your original photo with edited version.
HTH! If you're still having trouble please post!