#1. Duplicate the track, zoom in on the lower track so that it fills the frame and apply a medium Gaussian Blur to it. Feel free to apply a Border FX to the upper track to make it stand out.
You can also put any kind of background you want as the lower track, just so long as it fills the frame and is not distracting.
#2. Open up Pan/Crop on the still, right-click in the middle of it and choose "Match Output Aspect. This will zoom in on the centre of the image so you decide if you want to show the middle, upper or lower portion of it. You can also do a tilt down from top to bottom.