First, you can get those pictures into an oval by MASKING. Use the help files that come with flash and look up masking. Its pretty easy but too lengthy a tutorial for here. Secondly, When you asked about layers I'm assuming your talking about layers in the flash movie. You only HAVE to have one but usually someone whos new to flash will have way more. Once you grasp the concept of actionscript you can reduce your file size and layers by using the scripting language and not as much of the time line.
I hope this helps,
DJ