Open 2 documents. One is your Canvas BG document, the other is the oversized Image you want implant to the canvas document.
Copy image of 2nd doc, Select all, Ctrl + C then target the BG Canvas document and CTRL +V to paste it.
This puts the 2nd oversized image into the 1st image as a new layer, which you say is way to big.
Do CTRL +T to enter Transform, followed by CTRL + 0 (zero) to see the entire screen. Grab the corner handle and drag smaller while holding down the Shift key to constrain proportions.
When you say "Grab the corner handle and drag smaller" I know what you mean since this is how I would do it using MS Paint.
The problem is, I don't get a corner handle to show up. If I hold down the Shift key, it merely prevents me from seeing the movement until the movement is complete (i.e. as I move the 2nd image where I want it, the screen automatically shows where it is being moved to whereas holding down the shift key merely moves an outline around which, once the shift key is released, becomes the location of the 2nd image).
I should mention that I am using a Mac and not a PC. Is that why there is no corner handle to grab?
Substitute CTRL witn CMD in my instructions.
BTW: After you do CMD + T, the very next command must be CMD + 0
Is there a way to lock the aspect?
When I grab the corner handle, the vertical and horizontal distort based on the amount moved in their respective directions. I would like to resize it but keep the same aspect ratio.
Read the last line of my first response.
HOLD Down the SHIFT KEY while resizing.
It takes a little practice to move and resize but you'll get used to it.