I've brought in both the characters now, and set them up to be about the right size and position apart as I had in the thumbnail (see I told you they were useful). I've wasted very little time drawing legs I dont need, but there is still an overlap of the arms and legs going out of the frame. Nothing could be easier to fix but more complicated to explain.
First you'll need a colored layer that you're using as a frame (and a background as we'll see later). Use this square as a selection to create a layer mask which will hide the parts of characters that are outside the square. Just ctrl click the frame layer to select it (like before), select the character's layer, and click the layer mask button. Your character is neatly clipped off where the square ends!