I had a VERY difficult time figuring out how to use downloaded elements on my pages. Everyone kept telling me it was easy and how to do it.

1. Have your l/o and your embellishment open as separate files.
2. Using your clone stamp, hold down the ctrl key and press alt while over your embellishment.
3. Go to your l/o and create a new layer.
4. On the new layer, "stamp" the embellishment. Don't worry about where you put it or the size, we will fix that later.
5. Now, with your embellishment layer selected, go to Image>Rotate>Free Rotate Layer. This will allow you to do any manipulation to the embellie that you would like.

I hope this helps you get rid of that grey box around your embellishments. If you have further question, feel free to pm me.