Photoshop :: Moving Images To Other Projects

I am doing a football program. It will be a standard 8.5x11 background page that will have small boxes of each senior, along with a box at the bottom of the photo that has their name and position. Sounds easy enough, I know. I came up with the idea to make a "Sr. Player Block" template with a block (just a rectangle shape) set at the bottom of the page which would allow me to pick the players image, arrange it to where it goes to the back so the block will show, adding their name and position on it, and then I was planning on flattening and saving each block and moving it to the background page. My problem is, is that when I open the actual photo, which looks great, nice and clear, to the block template, it gets pixalated and looks fuzzy! I have also noticed the same problem on some family program ads i have attempted, the photos I have opened (that get opened in a different little box look fine, but when i move them they look blurry...