humm..interesting. May be an issue with sizing but for now let look at something else.
Redo the steps again to paste the image onto the other. After you paste, go to "Layers" at the top of your screen and make sure Layer 2 is selected. Heres an image of what im talking about.
If its already selected, click the "Deformation" (right under the zoom) tool. That should put a resizable box around the pasted layer, if nothing else it should help you see where the pasted layer is going if its not in a visable area. It might also help to maximize the window that the photo is in then zoom out. You should see the deformation tool outline that way. Heres a pic with a pasted layer thats outlined with a deform tool and zoomed out.
