2/. Remove the background from the over the top image.
2.1 Image Size.
2.2 File New/Transparent and the same size as the original image.
2.3 Copy/Paste the image to the new Transparent file.
2.4 Erase the background by using either: Eraser Tool, The Magic Wand Tool, the Rectangular Marquee Tool.
2.5 Use the Move Tool to position your image.
2.6 Copy/Paste the over the top image to the waterfall and use the Edit/Transform Tool to resize the image to the required size.
2.6 Move the image into its holding position.
2.7 Using the Opacity, drop back the image luminosity to a fade out.