This tutorial really helped me. I don't have objects floating above the background anymore. In a nutshell, I copy a section of background and put it over my object as a new layer, then use a brushtip on the eraser tool to fade the edge. My copied section is put right back on top of where I took it out with the object in the middle of the layer sandwich. If I line the section up with the background, I don't notice it at the edge where it isn't faded. That can be hard to see, so I'll sometimes use a grid (the shortcut is Ctrl+' to turn grids on or off) to keep track of where the section should go.
When I've got it the way I want it, I link the faded section layer and the background layer so they stay aligned with each other. If I need to move the background, I won't have problems with the copied section staying lined up. A merge won't work, I would lose all that fading unless I merge my object layer sandwiched between the background layers. Linked layers don't have to be next to each other in the layer order. I can put any number of layers between them and I can link more than two layers together at once.
To link layers, I make the first layer active and hold the Ctrl key as I select other layers. I right click on any one of the selected layers and click on 'link layers' in the middle of the list. A little bit of chain will show up next to each of the layers that is linked. To unlink all of the layers, I select one of the layers that is linked and right click. Then I click on the option to select linked layers. Right click again on any one of the linked layers that are all now selected and click to unlink them. If I just want to unlink one layer, I select the layer I want removed from the link, right click and then select to unlink layers. The layers are linked only in alignment. If I move one layer, I'll move all the layers that are linked to it.