Unless it's strangely shaped, I usually just draw a rectangle to fit over top the photo and apply my outline for the cut contour spot color.
Another way is to select the image, then go to Effects, and Create Boundary. Then click the newly created rectangle and apply your outline. I prefer to use my own rectangle though cause I usually scan the photo in a little sideways and so I need to crop it a bit.
As one of the previous folks said, "Taking the mystery out of print/cut" will help understand some of the processes, it's free of charge on their website:
http://www.rolanddga.com/color/unive...re/default.asp
Off to the left is a link saying "Available here", click it, then click the Download Now link (don't have to register or fill out their form)