Masking layers in Premiere

I do this with the Track Matte Keying Effect. The Matte (can be Feathered, or other) is placed on a Video Track (what many incorrectly refer to as Layers, especially if they work in Photoshop), above the material in Video Track 2 (in your instance), and then linked from that via the Track Matte Keying Effect.

Good luck,

Hunt

This THREAD might also prove useful.

Hope that this helps,

Hunt

Though it is for applying a Blur to a moving subject and limiting it, this TUTORIAL covers all of the main points. You will have to "read between the lines a bit," but the techniques are all the same.

Good luck,

Hunt

Sometimes a real simple fix can be to just increase the scale of your video and then just move that little bit you don't want to see just out of shot.  It can prove a much easier method than mattes