Well, that's the part I'm fuzzy on.
The Overlay: Cut out (delete) all the background pixels (using Magic Wand, Eraser, etc.) Carefully!. Feather the remainder to make it look nice and smooth.
Text Backround: Cut out the things you want in the foreground. Copy them to another layer (top layer). Add text, etc, to the bottom layer, or make a third layer and put the text there (middle layer, or something like that).
Alpha Masking: Heck, I wish I knew.
Sorry for the brief, basic advice, but I need to get to bed.