Fade Image

http://www.pixentral.com/show.php?picture=1hiSRZOJ6XPQtE2cqeIFsFCqXoqAWZ0

1. Duplicate the background layer
2. Place a blank layer between the background and the background copy layers, and fill it with white
3. On the top layer (background copy) make an oval selection with the Elliptical marquee tool   
4. Go to Select>inverse 
5. Go to Select>feather    25-40px (experiment)
6. Hit delete on keyboard
7. Press CTRL+D
8. Access the Type tool (T) and type your message
9. Access the Effects palette, select Bevels>Emboss. Apply
10. Access the Visibility options and select Hide. Apply

Optional - to place a simple border around the picture:

• Open a blank layer at the top of the stack and press CTRL+ALT+SHIFT+E
• Go to Select>all
• Go to Edit>stroke(outline)selection, place stroke:inside, width 4-6 px

I don't have PSE7, but if it has a Text Panel effect, you can use it -- see this discussion:

http://forums.adobe.com/message/3895733#3895733

Ken

If you simply want to fade the entire image:

- Duplicate the Background layer.

- Add a blank layer between the two and fill with white.

- Lower the Opacity of the top layer.

Why not just use the white layer as the background?