Final Image.
Steps (Using Photoshop and iScissors):
Invert the original dog image horizontally
Blur the edges using a gaussian filter (to help with the furry edges)
Use iScissors to cut out masks of the puppy and the ball
Scale and replace the original aibo dog with the puppy
Replace the ball which was obscured by the puppy
Smudge borders as necessary :)
Note that the puppy is so furry that it covers its paws