This method describes the rounded corners effect using Rectangular Marquee in Photoshop CS3.
1) Open photo, which will reside on Background layer.

2) Select Rectangular Marquee Tool and draw box on the portion of the photo you want captured and rounded.


3) Select --> Modify --> Smooth

Change Sample radius to the amount of roundedness. Trial and error.
Notice how the rectangular selection now has smoothed, rounded corners.
4) Edit --> Copy
5) Open new file: File -->New
6) Edit --> Paste into new file. This should paste the image inside the rectangular marquee into the new file on Layer1.


7) To create Drop shadow box, go to Layer Style-->Drop Shadow.

8) Finished product --> Rounded corners, white border background, and drop shadow.