Actually, it sounds to me like you don't have your settings right. First of all, make sure that anti-alias is selected. Then, you'll want to increase the tolerance level (standard is 32, but the higher you go, the more you'll select at any one time). IMO, you shouldn't have to blur or erase edges (I never have to). Also, once you have your selection, you can go to select->Modify-> feather to soften things.

Sometimes, it's all about contrast. Need to pick out colors that are too close together? Make a new layer, play with the levels for a much bolder contrast, and then make your selection on that layer. Now turn the layer off and return to the previous layer to do what you want it to do.

The easiest thing to do is sometimes to select the background instead of the actual subject matter (which may be way more complex), then select the inverse. Also, to select everything on a layer quickly just press control and then click the thumb nail of the layer your shape is on. It automatically selects a perfect shape for you. (This doesn't help if you are trying to separate an image from the background.)


For your second question, there is an easy way to do this as well. Just post the image on the new layer, and merge the layers together! If you are trying to fill a shape with an image, you could always just apply a quick mask. Select the two layers (with the filler layer on top), then press alt at the area between them. The top layer will not go outside anything on the lower layer. If you want them together, just merge them. Photoshop automatically puts things on new layers to keep your image more editable.