Reducing image size loses sharpness

Question

BEFORE YOU LEAVE WITHOUT READING THIS WHOLE THING, YOU MAY BE ABLE TO HELP BY ANSWERING ONE SIMPLE QUESTION:
I have a background that has 8.5" x 11" external dimensions.  In the project bin, I'm also showing a layer (with transparent edges) that I've resized to 1" x 1.5".  When I double-click the background to put it on the screen, and then drag the layer  onto the screen, why doesn't it look like a small picture on top of a big one?  Instead, it's huge, and I have to drag it down to size with the move tool!
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And now, the entire story:
Running PSE9 under Mac OS X 10.6.8 Snow Leopard.
My project is a montage of stamp-sized images on a letter-size background, as in the attached -- commemorating the woman in the centerpiece.  I've stumbled though this kind of effort before with great success.  This time the small photos are coming out blurry, and it's because this time I've done one thing differently.
In prior efforts, I recall somehow reducing the outside dimensions of an open file to about 2" x 3" before editing and finally adding it as a layer to the big background (using Move Tool to size it to fit), although during editing I was working with a reasonably-sized image and not a stamp (probably using command +).  The images in the final version were all sharp.   On this effort, however, my aging brain did not help me remember how to do it the same way, and I ended up working with the original photo, and then when I added it as a layer, I reduced it using the move tool -- very clumsy in view of the fact that the edited layer's image seemed to be larger than the canvas I was building, and the final images were blurry.
I started reading Help on the subject of resizing, but that was way too much information for me to absorb before the end of the new year, and I'd like to finish the work in the next few days. (The attached photo IS the current project, and I whipped it out in a day, albeit blurry.)   I'd appreciate it if someone could give me a brute-force step-by-step to do it the way I've done it successfully before.

Answer 1

The answer to your first question and the big one are very closely related. When you combine images, the resolution of the bottom (background) layer determines the resolution of the entire image. This means that if you have a low-res background (say, 72 ppi) and then you bring in high-res images (say, 300 ppi) the added content will be huge in comparison to the size of the overall image. When you scale it with the move tool you aren't doing yourself any favors if you make large changes that way.
The best way to approach this is to make sure that all your images are at about the same resolution before you start (image>resize>image size). Also, make sure your background is not at a low resolution or the end result will print badly no matter how much time you spend combining things.