Different kind of blending

Ok , if you remember, (which i dont c why you would, but anywayz). i was asking for help on blending images and i came out with my first work:
http://www.geocities.com/final_xero/dragon.gif

but now i would like to know how to take the whole image, and make it transitional with a background image, not just the border to blend in, but the whole picture to blend smoothhly in the background (almost transparent)

select all, then goto select>modify>border and enter say 2 maybe 3 pix, then hi okay, then fill with whatever color your background is.

Snore