While there are various ways to create a blur frame, this particular tutorial will walk you through the easiest way to do it in Photoshop 7 (though the same steps will work in Photoshop 5-C2).

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Step 2: Using the guides to outline the frame, use the square selection tool to select the outline of the frame.

Step 3: With the selection still active delete that selection

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Step 4: With the selection still active, do a reverse selection by pressing ‘ctrl’ + ‘shift’ + ‘I’. This will highlight the frame border.

Step 5: Add a gaussion blur to your liking, and if you like, adjust the colour, saturation etc.

Step 6: With the selection still active do a reverse selection by pressing ‘ctrl’ + ‘shift’ + ‘I’.

Step 7: With the selection still active, create a stroke, go under ‘Edit’ > ‘Stroke’ (The example below uses a 5px width with white colour, but you can do what you like here).

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Step 8: Adjust the original image which should be on the bottom layer accordingly, whether you want to move it, scale etc. and voila!