Insert/Shape/Circle. Remove the line. Change Colour to suit. Use the resizing handle on the side to squish the circle in to make an oval.
Go to Effects/Edges/Soft and adjust to suit.
If you want to use the actual photo to make into the oval shape:
Open the pic.
Use the marquee tool/circle. Uncheck the "keep ratio/proportion" box. Mark out the area you want to use. Go to Edit/Copy then Edit/Paste. Delete the orignal photo. Now apply the Soft Edge effect as above.
Also, check out the following video tutorial.
http://scrapbook-bytes.com/cgi-scrip...icle_506.shtml