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Sorry, proper URL is:
You will also find links to many free tutorials in the Premiere Pro Wiki that will quickly show you how things are done in PPro, including picture-in-picture effects.
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This is from memory, but you should be able to do...
1) Open the effects control window: (Menubar at top of app) window->effect controls
2) left click on the clip in the timeline (your divx4low_proxypeer.avi)
3) left click the motion filter in the effect control window
That should put the direct-manipulation outline around the video in the monitor window and allow you to change the scale.