Here's another "photo within a photo" example for the August Monthly Special. I took it in Paris last year. I was walking down the Champs-Elysées and I noticed at the end of a side street something that made me think my vision was distorted. I had to get pretty close before I figured out that the undulating building was in fact a photo façade that some renovators with a sense of humor had put up to cover scaffolding. It was raining, as you can see, and the two women holding red umbrellas (both real) were the perfect Magritte-like touch to the surreal scene.
How are photos (of varying scale) used in public spaces where you live? You may not find something quite this dramatic, but posters and billboards might give you some ideas. I recently found a great photo blog from Paris that just happened to have an example of a photo within a photo posted along with some thoughtful commentary. Check it out.