first cd layout attempt

I am going to try a cd layout. When I open the templates in Photoshop 7 do I have to choose 300 dpi (the same dpi required for the images I have saved); make all the same choices as I have to for the images, (ie) CYMK, 5x5 inches, 300 dpi etc.? When I have the template open, what is the best way to bring the image to the template? Is the template considered a layer? Do you always see the template through the image as you are working with layers? What is the easiest way to start another layer? How do you save each layer? How do I make my jpg become a photoshop file? Some of these Qs might be dumb but if you can answer them I may be able to fly.

When I open the templates in Photoshop 7 do I have to choose 300 dpi (the same dpi required for the images I have saved); make all the same choices as I have to for the images, (ie) CYMK, 5x5 inches, 300 dpi etc.?

Yes, for print keep everything a constant 300 dpi.

When I have the template open, what is the best way to bring the image to the template?

There are tons of ways to introduce an image into any other photoshop document.

You can (with the move tool) simply drag an image from one image window to another. (this creates a new layer with you dragged image on it)

You can use the FILE>PLACE command

You can copy/paste (this is layer dependent, what ever is active is the layer you are pasting into.)

Is the template considered a layer?

The template for a "CD" would have lines and stuff in the 5 x 5 document yes it is more than likely a layer.

Do you always see the template through the image as you are working with layers?

assuming it is a layer, if you don't want to see it anymore... click the "eyeball" icon to the left of the layer in the "Layers" pallet.

What is the easiest way to start another layer?

Click the "create new layer" icon at the bottom of the layers pallet.

How do you save each layer?

Layers are saved all together in the .psd file. Now if you are asking; How do I save each individual layer? Then just turn off the eyeball icon on all the layers but the one you want to save.

How do I make my jpg become a photoshop file?

If you open a .jpg file and add a layer to it, it is at that point a .psd if you just FILE>SAVE it automatically gives you the option to save the file as a .psd.

Now with all that typed, I'll tell you something that will REALLY help you alot. Read the "Help" files included in the Photoshop program. If nothing else those help files will help you learn what buttons do what.
Photoshop is actually a very friendly application, most of the time.