What version of Premiere Elements are you using and on what computer operating system is it running?
So, for now generalizations...
a. You could use one of the program's Title Templates which is designated "frame" type. Template on Video 2, photo on Video 1.
b. You could place your photo on VIdeo 2, scale down the image. And, then you can place a color matte on
Video 1 directly below.
c. You could bring an image which already contains a frame into the project as source media.
Please review the above, supply more details, and then we can decide what next.