Load the main clip onto track V1 in the Timeline. Add the inset clip on V2 positioned over the clip on V1. Double-click the clip on V2 to load it into the Viewer window. Click the Motion tab. Use the Scale and Center controls to size and position the clip how you want it.
Alternatively, you can set the Canvas window to Image+Wireframe mode and highlight the clip in the Timeline you want to manipulate. Once it's highlighted and the playhead is somewhere on the clip, use the mouse pointer to grab the corners to Scale the clip and you can also drag it wherever needed. You can also use the Distort tool [d] to add a 3D effect.
-DH