This isn't exactly what I wanted, I am getting a bit frustrated with my lack of layering skills! I may keep working on this one, but here is one version for now.
I am not even sure I can tell you what I did because this is probably the 20th attempt!
I know I lassoed the squirrel out and copied him into a square. Then I cloned and blurred the edges out. Then I smudged the very edges. I was going for a looking through an iced window effect.