Bill, Before you make the layer to remove the head like you did, make another layer from a selection of the head. Then make your layer and remove the head doing whatever you did to get it like in your second image that way it will be gone and out of your way. Next, activate the layer copy of the head and select the Move tool to move it where you want. if you need to rotate it you can use the free transform or rotate tools. You'll have to smooth and feather the edges too.





Additionally, If you wish to make the blood look more gory / realistic, If CS3 has the same filters as CS4 and CS4 then make a selection of the blood only and create a mask for that selection then go into Filters / Artistic / Plastic Wrap. The Plastic Wrap does a good job of making blood look more realistic and gory. And maybe use the smudge tool to gradually blend/smudge the blood down the sweatshirt.