Start by creating a new document that is 8" x 10" with the resolution set at 72 dpi. "File --> New"
Open the picture you want to frame and using the crop tool (c), set the size in the options bar to 7.5" by 9.5" with a resolution of 72.
Now, draw a box using the crop tool around the part of the picture you want to keep. When you are happy the placement of the crop box, double click the mouse to crop the selection.
Go back to the new document you created in step one. Create a new empty layer. Name that layer "Frame". Set the foreground color on your Tool Bar. Pick a color that is going to enhance the picture you are choosing to frame. You can use the eye dropper tool to select a color from the picture that would make a nice background color. With the Frame Layer selected, choose "Edit --> Fill" to fill the Frame Layer with the frame color.
Make sure you have the rulers showing at the top of your document, (Apple-R). Make sure you are on the "Frame" layer. Using the Retangular Marquee Tool, draw a recantgle and make sure to give yourself a quarter inch border around the picture. Once you have your frame selected, delete the inside of the frame using the delete key on the keyboard. If you want to add a "Layer Style" to your frame this is where you are going to want to do it. In the example below I added a "Bevel and Emboss".
Make another now layer and name that layer "Black Line". Create a selection using the Rectangular Marquee Tool that is 1/2 inch from the border of the document. Once the selection is made, choose "Edit --> Fill" and fill the selection with black. Once you have filled the selection, go to "Select --> Modify --> Expand" and expand the selection by one pixel. This will give you the one pixel wide black line once you are done. Now use the delete key on the keyboard to delete the selection and create the black line.
Now go back to the picture you opened in step two and using the "Move Tool", drag the picture over to the new document you created in step one. You may have to do some resizing to make it fit perfectly. You can do this by choosing "Edit --> Transform --> Scale". Grab the lower right hand grab box and resize your picture to fit into your newly created frame.
Here is a sample of the finished product. Your assignment is to do this to TWO of your pictures in your iPhoto Library.