A few tips. Make the background of the photos you shoot more easily selectable. If you're shooting on white and blast the background with enough light that it's truly white and easily selectable. But ideally you want to shoot on a similar background that can be selected, inverted and feathered to make the selection more natural. I'm not familiar with PSP and it's selection capabilities. Photoshop may be more suited for what you're trying to do. Maybe try one of the programs specifically designed for making selection, like Corel's Knockout.

I suggest you use either a chromakey green or blue for easier knockouts in photoshop (or any digital image manipulation application).

The magic extractor in pSE 4.0 works very well for getting the subject off the background.
BUT!!!! How does one keep the image from looking so flat when you put in the new background????????????? It seems to loose a lot of dimensionality.

Have you tried adding a slight drop shadow to the image that's been dropped into the new background?

No I had not; never thought of it actually.
Thanks.