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Yes PRE10 does PiP very well. If your are currently working in Sceneline mode then switch to Timeline mode - it's much easier to see what is going on.
Take your clips and stack each on its own video track overlapping each other. You can then use the clip properties to set their size and position in your PiP scene.
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Welcome to the forum.
As Neale says, you certainly can do PiP - have been able to for many versions.
The "key" to doing PiP is the use of two of the Fixed Effects (Effects that are automatically added to every Clip, that you place onto the Timeline). They are Motion>Scale (size), and Motion>Position (location). Select the Clip (or Still Image), that you will use as your PiP, and then in the Effects Tab, go to Edit Effects, like Neale points out. You will see the Fixed Effects, and any that you have added, and you will want Motion. Initially, it is closed, but if you twirl it open, with the little triangle on the left, where you will then see Scale and Position. You have three ways adjust the parameters for those (plus the Bounding Box). For now, let's use the sliders. As you move those, you should see the changes in the Clip, and should also see the numbers change. Make the adjustment so suit, and you are done. Note: you could scrub on the parameters boxes, or could click on them, and then type in the settings, like the degree of Scale, or the coordinates for Position. Simple, if you know where to look.
There are also several PiP Presets, but I find them rather generic, and seldom use them.
Here is a look at a PiP w/ the PiP Image Selected, and the Effects Control Panel visible"
Thanks for the instructions.
Maybe I just do not understand this program enough, but I can't get it to do what Neale and you have pointed out. When I try to drop clip and stack another on its own video track - one video plays and then the other fully cuts in, it doesn't show up as picture-in-picture.
And the pic you have provided isn't exactly how I see things.
Any suggestions for this slow beginner? :-P
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OK, let's step back a bit.
First, are you in Timeline View Mode?
If so, you have the "background" Video Clip on Video Track 1, and have dragged the PiP Clip to Video Track 2 above it. Is that correct?
Now, if the Videos are the same size, i.e. fill the Frame Size in the Project, you will ONLY see the Clip on Video Track 2. The only way to see that "background," is to lower its Opacity, punch a hole in it, or "look around" it. That "look around it," is exactly what we are doing with PiP. By adjusting the Fixed Effect for that Clip, with Motion>Scale, we are going to make it smaller, so that we will then see the background Clip, around it. You will likely also want to adjust the Fixed Effect>Motion>Position, to move it to the desired location.
In my eaxample, the lady on the phone was Scaled, Positioned and then Cropped, as I wanted to eliminate a bit of extra area.
Good luck, and hope that helps. If not, please post a screen-cap, basically like the one that I posted, so that we can see what you have, and what you have done.