This is what I got so far.
A hot mess.
Sometimes you have to see it to see that it doesn't work as well as you may have imagined.
That doesn't mean it ultimately can't be done, just not quite the way you thought it would.
Edit: This is Photoshop, not Photoshop Elements. But I'll bet that PE gives you these capabilities as well.
I've attached below an example of what you're trying to do. Have you worked with Layers and Masks before? The Mask acts like a filter: White let's 100% of the image pass through. Black does not let ANY of the image to pass through. Any shade of gray allows the corresponding percentage of image to pass through.
So the camo image passes through the mask and shows on top of the flag.
Hope this helps. If you have any more questions, please ask.
And show us the results!