I will flip my image now, because I have and idea about all this madness.



I will apply layer styles to my Layer 1.



I've Just Color Burned the layer with red colored patters and got this.



We will also need a copy of our key layer.



Make a big transformation now to the layer 1 copy – the one that is higher.

Moreover warp the layer. I just really love this warp tool. Goof thing CS2 has it.