NOTE: I'm using 2.2, some functions were relocated in 2.4 but you should be able to follow along easily. To see more details from the image, click on it for a larger pic.
For this tutorial I used Template 101 from my Totally Templates blog.
In this image you'll see the layers dialog box. Notice the eyes. I always deselect layers I am not going to be working with that way they are out of the way. To deselect click on the eye. To unhide click again.
To get started I have chosen to leave the block frame overlay and the bonus paper visible. Select the overlay layer.
Now take the magic wand and select the white portion of the overlay layer. You'll see the marching ants.
Now go back to your layers dialog box and select your paper layer.
This step is important. You want to delete the cut-outs and have a frame with the paper pattern. In order to do this you must invert your selection, in other words, you want the opposite removed from what you selected. To do this go to Select>Invert in the image menu.
Now you need to Edit>Cut. I added a white background for this tutorial so you could see that the frame was left. You should have the transparency background on yours.
I want to add a drop shadow to my frame. Since my frame is the same size as the entire layout, I don't want the drop shadow to alter my canvas size. To prevent this, uncheck the box marked allow resizing. This is good to have checked if your image is tightly cropped and there's no room on the canvas to add a shadow. Merge your layers so your shadows are hooked to the layers they belong to (in the layers dialog box right click and merge down).
Here's my results of my shadow.
I'm going to go back and deselect the layers I just worked with since I am finished. I usually will delete the white overlay frame too. I unhide the next item I want to use. In this case it's one of the photo boxes to the left. You don't have to use a photo to fill in these boxes. You can use papers instead. The above image shows my color block and an added photo. I selected the block layer then I went to my image menu and File>Open As Layer and chose my photo.
I need to use two things from this menu option shown above. It's very important that when you want to alter the layer that you choose layer instead of image. So first I'm going to Layer>Transform>Rotate Right then I'm going to Layer>Scale Layer because I want more in the photo than there's space for on the block.
Once it's scaled to size, as shown above, I will select the box layer, then using magic wand select the box (image), then I'll use the move tool (the thing that looks like a compass with arrows) and move my photo to the box, selecting the photo layer before moving. You can still resize your layer if you need to. If for some reason you lose your marching ants, repeat the steps selecting your box. Once it's centered, select invert, make sure your photo is selected in the layers box and Edit>Cut.
Here's my results so far. Keep repeating until you filled in all of the parts from the template with your papers and photos. You can embellish it more by using the File>Open As Layer option to add elements and don't forget text, alphas, any filter effects, drop shadows, brush work. It's only limited by your imagination.
Keep in mind when scaling something, you can scale down but if you scale down too far you can't scale up, use the undo tool to get your larger size back or re-open the item you're scaling. Scaling up will distort your image.
Save your work often. Stuff happens. In Gimp you can save as an xcf or a psd file to retain your layers. Xcf files seem to save smaller megabyte wise than psd for some reason although there's no loss of quality. You might want to save your item in layers when you are finished too, just in case down the road you notice an error or you changed your mind about something. I keep these working files around for a month or so, but that's just my preference.
Check your spelling. If you're not sure, use Dictionary.com since Gimp doesn't have spell check. Flatten your image and save as a jpg file. Change the default 85 to a 100 for a higher quality image. I put it at 90 and 600 pixels to display in forums to keep the file size per the rules (usually under 100kb). Some coloring in your photo may effect the file size.