What is the best image characteristic for use with an environment layer?

CS6, Win7, HPz820
I have watched several tutorials on the use of the environment layer and each has a nifty experience with the image the imported.
When I do it, it looks like this without the Environment layer effect attached:
And this way then I apply the environment layer:
Is there a way to select the image so it will maximize the quality of the image when the effect is applied. I tried  a stitched image of several photos done in PS, with a better outcome but still a lot of distortion.

As Mylenium says, the environment layer's purpose is to provide reflections and such for 3D layers in a scene. The distortion that you're referring to is because the layer is being formed into a spherical shell surrounding the 3D scene so that reflections can come from any direction.
If you want a layer to serve as both an environment layer and as a visible layer, you'd use two copies of the layer, with one set as an environment layer to appear in reflections only.

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