http://img235.imageshack.us/img235/1981/ol2rl.jpg
Back in the day (P.C.) the issue of 'outlining' a photo was accomplished by hand. Either the artist would create masks using 'amberlith' or a liquid mask. Or a "stripper' would create a film mask from 'rubylith' and/or film ( positive image of the subject ) and some handwork. The hand tools usually consisted of an x-acto knife and a rapidograph pen. Then, once the mask was complete, they would make a series of film 'shrinks and spreads' to accomadate trapping the image outlined into a background image, color or tint.
I've gone ahead and recreated this technique in PS. It still sort of works.
Ex.A is the mask. created by copying the image, convert to greyscale, invert and manipulate with 'curves'
Ex.B is (return mask to rgb) copy orig photo over the mask layer. use cmd-g (ctrl- g) to ko the background. Select the subject (Tolerence depending on the subject) Inverse the selection then using the eraser tool set at 10 % pressure, soften the egdes of the subject.
Ex.C create a background. This is where some art direction comes in, Everything you do is subject to how it is to be used. This, of course, is all part of the design process. If you design it so that the outlined photo is to be used with a background ambience that is complimentary to the subject, as in Ex.C or Ex.D then life will be easy If the ambient color is bright red, Then you may want to make some curve adjustments at the Ex.B stage.
Ex.D is simply to show how the 'outlined' subject compares to the original.
If you can, find some printed matter that pre-dates the computer and Photoshop. You'll find some amazing things that were done by hand, by Pros that had great skills working with film and manipulating light.