Steps 1 through 6 were straight forward but step 7 is where I ran into trouble.

To replace background of this image, follow these steps:

1. Open the image. 

2. Duplicate the background layer twice. Rename the
uppermost layer Edit Layer.

3. Add a transparency (in the form of an alpha
channel) to the Edit Layer (Image Menu ➤ Layer ➤
Transparency ➤ Add Alpha Channel).

4. Open the Threshold dialog (Image Menu ➤ Colors
➤ Threshold). Leave the slider at the default setting
(Figure 8-29), then click OK.

5. Reverse the black and white colors (Image Menu
➤ Colors ➤ Invert). Using white as the active color
and a hard brush, fill in the black gaps within the
inverted silhouette.

6. Lower the opacity of the Edit Layer to reveal the
image underneath sufficiently to use it as a guide
to paint the edges of the bands in the sweater and
to refine any jagged edges around the subject. When finished, raise the opacity back to 100%.

7. Cut the Edit Layer to the clipboard (Control + X).
Using the Select By Color tool (Shift + O), click in the
white area of the Edit Layer; make sure the Antialias
box is checked and use a Threshold setting of 8.0.

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   If I cut the edit layer to the clipboard, the edit layer is removed from the layers dock and it's no longer visible. Which makes it impossible to click in the white area with the select by color tool. I chose to reverse the steps here, and used the select by color tool before cutting the layer. Mistake?
   Which mode should the tool be in? replace selection, add to current selection, subtract from current selection or intersect?
   Also, should select transparent areas be checked? Sample merged? Draw mask?   

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8. Add a layer mask to the background layer copy
(Image Menu ➤ Layer ➤ Mask ➤ Add Layer
Mask). Make the duplicate background layer active
by clicking the preview thumbnail.

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   Which option should be selected to initialize the layer mask to? Should the mask be inverted?

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9. Copy the subject (Edit ➤ Copy). Click the layer mask
to make it active, and paste the extracted subject
(Control + V). The pixels of the original background
have been made transparent.

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10. Open the new background image using the Open as Layers option (File ➤ Open as Layers ➤ File. It should be placed above the duplicate background layer.

11. Copy it to the clipboard (Control + C). Paste it
as a new layer into the project (Image Menu ➤
Edit ➤ Paste As ➤ New Layer). Rename it Studio
Background and move it under the background
layer copy. Paste the copied pixels into a new layer
(Edit ➤ Paste As ➤ New Layer).

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   Create a layer in step 10, then copy that same layer and rename the copy? Move the copied layer under the background layer copy, ok. Paste what copied pixels into a new layer?

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   I haven't gottem past this point. Nothing to work with. I have a bunch of levels, none of which contain an actual image.


12. Use the Dodge/Burn tool (Shift + D) with the burn
option selected and the exposure set to 75 and
darken the curls with the light fringes. Turn the
visibility of the background and Edit layers off.

13. Click the layer mask to make it active and use the
Blur/Sharpen tool with the blur option selected
to soften the edges slightly. Set the opacity to 100
and the rate to 20. Deactivate the selection (Select
➤ None).

14. Add a minimum amount of noise to the Studio
Background (Image Menu ➤ Filters ➤ Noise ➤ RGB
Noise). Use the lowest setting, with the Independent
RGB option unchecked. Check around the image
and use the Eraser tool to clean up any excess pixels
Use the Blur tool to smooth any jagged
parts of the edge.