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What version of PSE are you using? Try copy/paste instead of dragging, or drag from the layers panel into the background image window.
You need both photos to be in "RGB Color" mode.
Open your logo, use Image...Mode to set it to "RGB Color", and save it with the transparent background as a PNG file.
Open your background image and use Image...Mode to set it to "RGB Color". Then you can copy and paste your logo image with the transparency intact.
Thank you. The responses from photodrawken and Barbara helped. I can now
copy and paste the transparent image into my backgound. Now, is there any
way I change the size of the transparent image once I drop it into the
Select the move tool and drag the corner handles of the bounding box to scale the size.
Make sure show bounding box is checked in the options bar.