Here's how I use GIMP (note: this is what I've learned, adapted from a button tutorial that is at the bottom of these steps):
(1) Disregard the "cut line" (the outer line in the 1" circle template) entirely--I even just delete it while I'm working with an image so that it doesn't distract from what I'm doing.
(2) Scale the image I'm using down to the size and dpi that I need (the image should be around 350-400 on the smallest dimension--unless you're using just a small portion of the image in question--with 300 dpi).
(3) Copy the scaled image, then paste it into the 1" template "screen". Once I move it around so that the best part of the image is in the center of the template just the way I like it, I anchor the image. ("Anchor Layer" is listed under, well, "Layer" up at the top of the template screen.)
(4) Click on the "Ellipse Select" tool in the Toolbox (which is on the left-hand side of my screen when I open up GIMP)--it's the second tool from the left in the very top row--then check "Expand from center" and "Fixed:", making sure the drop-down menu for "Fixed:" shows "Size". Finally, I type 320x320 in the box directly underneath "Fixed:" (there are two little icons immediately to the right of the box in question) so that there is a little bit of wiggle room when punching the printed image out..
(5) Click and drag my cursor in the template box until the resulting circle/ellipse from (4) is centered around the "face line" (the smaller of the two original circles in the 1" template).
(6) Go to "Select" (3rd from the left at the top of the template screen), then click on "Invert".
(7) Go to "Edit", then click on "Fill with BG color" or "Fill with FG color"--whichever one would be white.
(8) Repeat step (6).
(9) Go to "Edit", then click on "Copy".
(10) Go to "File", then "New"...the dimensions I type in are 4 inches by 6 inches, or 1200 by 1800 pixels, whichever you prefer (they're the same size, regardless). I also make sure that the background for the new screen is white.
(11) Go to "Edit" (on the "new" screen), then "paste" TWICE (the image is centered on the screen by default)...I then move the second pasted image to wherever I need it to go and keep pasting and moving images until I have 12-15 images on the sheet.
(12) Click on the (white) background to anchor the last image to the background.
(13) Go to "File" (on the completed sheet screen), then "Save As". I then name the new sheet whatever I want (i.e., Angel Kisses) and make sure it has the .jpg extension after the name, and make sure it's going to the destination I need it to end up at. Click "Save", slide the "Quality" bar all the way to 100%, then click "Save" again. Done!
Oh, and whenever you close out the screen that you copied the original, scaled image from, don't click on "Save Changes", so you don't have to worry about it being messed up if you need it for something else in a different size/dpi later on.
Hope this helps! Please feel free to ask me any more questions if you have them!