What I would do is "create" the "frame" in PS and then Import the resulting .PSD. Use it on a separate Video Track from your PiP footage.
In PS (later versions), there are several "frame" creation Actions. One can also "create" them from scratch, or can photograph a favorite frame and then just remove the "picture" in that frame. I'd also suspect that there are 1,000's of "frames" on the Internet.
What you might want to do, if you wish to get creative, would be to go to a frame shop, and ask to photograph their frame-corners with some mattes. Offer to give them a DVD with those images for their use later.
Alright, this is perhaps a bit unorthodox (in fact, I've never had a use for this effect before now), but I think I might have a solution for you: Camera View. It's an effect in the "Transform" category, assuming you're on Windows.
Scale your PIP clip to the desired size, and then apply Camera View. At first, you really won't see anything happen, save for a tiny bit of "bulging" of the PIP. To create the frame, increase the Distance parameter; immediately, the PIP will recede and leave a white border around the frame. The Distance parameter effectively sets the width of the frame; you can further customize the frame by changing the Fill Color to your desired color. I'm pretty sure that this effect was never intended to be used this way, but hey--it works! Note that the video content of the PIP will be somewhat decreased in size, so you may have to compensate with the Scale parameter in the Motion effect to return to your original dimensions.
One added benefit: the Camera View effect (like all effects) is applied before any of the parameters in the fixed Motion effect are applied. In other words, you can alter the clip's scale, position, rotation and opacity, and the effect will follow along in lock step with no additional tweaking of the frame necessary. For example, if you scale your PIP up or down, the frame will maintain the same relative size to the PIP, and you don't need to animate anything else. Easy!
You can also make frames in the Titler if one does not own Photoshop.
Draw a rectangular the size of the PIP.
Set the graphics type to filled bezier and the fill type to Ghost.
Now add an outer stroke and set it to Edge.
Increase the size.
For the appearance experiment with Fill Type, Sheen or Texture.
Now drop it in the timeline add a Bevel Alpha and a drop shadow with no distance but lots of softness.
Nice use of Titler. Sometimes, I overlook its built-in power, as I first reach for PS, for this sort of thing. Just like some of Colin's suggestions, it's nice to know that one can remain in PrPro (whether they have PS, or not) and what they can accomplish.
This video might help if you start watching from 1:40. The titleing tool of Premiere Pro can even make use of images. My video was made only to debunk a few myths rather than being a tutorial.
Bill, after all this is the Premiere forum.
So right you are!
BTW - like the new title. Meant to comment on that in the Bridge forum, but got side-tracked.