there are several ways but I think using a layer mask is best; others may have ideas too.
But hair usually requires a selection and using all the newest selection tool skills...there are tuts available; Google is your friend
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As Doug mentioned, using a layer mask is generally a good way to composite an image.
There are other options such as using the marquee tool, lasso or the magic wand and refining your selection with the feather, contract, expand options under select>modify; but these can get a bit messy.
Here are links to tutorials that you might find helpful:
1.This one teaches the basics of layer masks:
2. This one you might find more helpful. The tutorial goes over techniques such as color and shadow manipulation to make a person fit in the environment in an image.
That is a great tutorial, and for this that function alone, I'd say that upgrading to CS 5 (now CS 6) would be worth the $.
For Layer Masking in pre-CS5, he had a great tutorial, on "Wavy Hair," but it is now gone, replaced by this updated one. For the OP, the old one had everything needed. Now, the new function takes much of the "hand work" out of the process.