Bruce Gabrielle, author of Speaking PowerPoint, demonstrates how to crop around an irregular shape, removing the background. Learn more at www.speakingppt.com
I designed something similar to this without tracing. I duplicated the original picture and removed the background on the copy and kept the image I wanted to stand out.. Then I blurred the original image and placed the single image in front. I'm thinking I'll be able to use your technique for something else so thanks!