How to merge two images with fading effect?

Please, fellows, help me with that!

I need an effect that makes one image borders fade smoothly to another image like this:

I searched for hours and the closer I could get was this CorelDRAW tutorial. It shows how to merge two images, but not the way I want.

I tried CorelDRAW's Blend, Lens, Transparency, Interactive Fill and several effects in Photo-PAINT TNA.

Is there a way to do that with Photo-PAINT?

TIA.