I found it. For those who wonder about creating frames in Photoshop 7.0 here it is:
1. open your photo
2. create a new document with a white background. This should be the size you want your picture to be
3. move the picture over
4. Ctrl + T (this is a the transform command) make sure the layer selected is the picture
5. move the sides in until you get the desired boarder size
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