Lets say i have this nice rectangular PC Game box art. Lets also say i have this template for a papercraft arcade cabinet. What would i do if i wanted to take the area outlined in green and cut a section out of the box art in the same shape and be able to shrink the art to fit or move it under the "cookie cutter"? Please note i would like to avoid the "poster tacked on the side" look.

Please note that i've tried making the box art a layer under the cabinet template. All GIMP will let me do is resize the area under the hole i made in the template, it "forgets" the rest of the layer

I'm not quite clear with what you want to do. I THINK you want to cut out the area in the cabinet. Check your cabinet layer and if the name is bold, right-click it and Add Alpha channel to allow transparency.

I suggest that after you make the selection you want to cut out to Select > To Path.

Then Select > None.

Select > From Path then do your cutout. The path gives a smoother cut out.

Select > None

Put your box art in the layer below and if you want to scale it down, make sure it, too, has an alpha channel. Select the box art layer then Layer > Scale Layer. That way the whole box art layer will be scaled.

Then you can move the layer around under the cut out hole how you want it.

I've made a very rough example of a cut out and used an image of a sunflower to demonstrate. I put the sunflower into the cutout image and moved the sunflower layer below the cutout layer.

I selected the sunflower layer and scaled it smaller and moved it until it was under the cutout area. You can see the dotted layer boundary around the flower layer.




This shows the layers.

i think that'll do the trick, thanks!