I use PSE 5 and I am walking through the tutorial document on Using Templates in Photoshop.

I opened up a template (PSD format) and 3 different papers to include in the layout. I select the layer in the template that I want the paper on and and drag and drop the paper in there but it drops as a small square in the middle of the layer. The tutorial makes me think it will take the same size as the layer once I do the CTRL-G....but it does not.

Is there a setting I am missing in PSE or am I missing a step?? Should I resize the paper??

My template is a 12x12, if that is helpful information.