I had a brainstorm just now. :) After spending all that time explaining the part about cropping photos so that they fit better inside templates, I realized that I had been doing something else in other situations that translates perfectly into templates. If you use PSP I hope you can follow this because I don't have screen shots. Here we go.
1. Copy your photo (or paper) that you want to put into the template.
2. Paste the photo as a new layer onto the template.
3. Arrange the layers so that the photo is directly under the part of the template that it goes in.
4. Position the photo how you want it to look (tilt and scale.)
5. Select the template shape. Then, use the magic wand tool to get marching ants around the part of the template that the photo will go on.
6. Invert the selection (Ctrl-I). Now the marching ants are going around the whole page and the template shape.
7. Select the photo layer. Now hit delete. Everything on the photo is deleted, except the part that goes on the template.
8. Select the template layer. Invert the selection again. Hit delete. Now the gray template shape is gone and in its place is your photo (or paper.)
9. If you left part of the template (such as the frame around a photo) you can then right click on that layer on the layers palette and then select Merge-Merge Down. This will merge the frame with the photo so that you can move them together if you want.
This takes a little longer than Ctrl-Shift-L, but it helps to avoid the distortion that can sometimes happen with templates in PSP without cropping your photos ahead of time.