[Pu the Owl]

Since I use it (and it's considered by most people the best program you can get for these things) I'd say Photoshop is what you need for these kind of things. Paint Shop is a good option too. Other programs, as Corel etc. are not as good as these IMO.

As for tutorials, you can search this directory for image blending/merging. I had some other useful tutorial link, but I can't find it anymore. If I can find them again, I'll post later.