You could certainly get the shape and dreamy effect using the Track Matte.
But it's a pretty high-level tool. If you know how to use it, I can tell you how to create the effect you want. If not, it may be a bit too complicated to explain on this forum.
For what it's worth, I spend a whole chapter demonstrating, step by step, how to do tracks with the Track Matte in my special effects book, if you're interested. http://muvipix.com/cooltricks11.php
Along with the Track Matte Keying (a method that I often use), what about doing something like this:
- Create the "thought bubble" as a Title (this could also be a graphic of a thought bubble created in another program, or downloaded from a Web site, then placed on a Title.
- Create a Text Title, with desired Type, as a separate Title, placed above your thought bubble Title on the Timeline.
- Apply a Fade-In/Fade-Out, or Keyframe that Title's Opacity to accomplish the fades.
- Create a second Text Title (Duplicate from the first Title will keep the design settings, but create a separate Title, that can be edited separately, from the original).
- Place that Title above the thought bubble Title, and apply any fades necessary.
- Then, when that has completed, adjust the Fixed Effect>Motion>Scale to your thought bubble Title, to expand it to fill the screen.
Thought bubbles are, of course, part of the Graphics set that comes with Premiere Elements, Bill. So there's no need to create them.
The bigger challenge is placing a picture inside that bubble that's the shape of the bubble rather than square and with a soft edge. And I can't think of another way to do that than with a Track Matte. Can you?
No. For placing the Video "inside" the thought bubble, the Track Matte is the best way to do it.
OTOH, if one were to Scale the thought bubble up to fill the entire Frame, it would then be a simple matter of adding the new Video above that, and just do a Cross-Dissolve. I had envisioned the thought bubble Scaling up completely, so that only the white Fill was left, and the Video coming into that.
If the bubble is to appear near the screen's periphery, then it would be Track Matte, and the graphic could probably be used AS the Matte.
As for the included graphics, I more often animate my thought bubbles, so creating them in Photoshop, with the little "bubbles" on separate Layers, to animate those to "create" the full thought bubble, is my normal workflow. If the ones included work well, then no reason to build them, or search the Internet for more.