Export your project 1 Timeline to a file saved to the computer hard drive. Then import the export into project 2. Make sure that the project settings and export settings are consistent between projects involved. Some prefer to use a Lagarith lossless codec.avi for the file. More details if necessary.
Depending on the situation, use ClipMate (Windows Only) in conjunction with Premiere Elements for a copy/paste insert of content between programs.
Please review and consider. Any questions, please let me know.
ATR - thx for your input. So I'm clear, you're suggesting creating a finished video clip from project 1 using the timeline clips as opposed to saving the clip sequence itself that could be posted in projec 2. Correct?
To clarify, you just take the portion of the project 1 Timeline that you want, not necessarily the whole Timeline...the whole Timeline if your sequence represents the whole Timeline content.
If selective export is involved, in the Edit area, you set the gray tabs of the Work Area Bar to span just the segment wanted for export AND you need to have a check mark next to the option "Share Work Area Bar Only" in the export settings if your choice of export has that option. If you do not have these two requirements, you cannot use this idea for selectively exporting a portion of a project's Timeline.
This screenshot was from a Premiere Elements version earlier than 11.
Please review and consider, and let me know if you are OK with the details.