I don't have Photostory but IMO anyone who does will have difficulty helping you without more information.
For example:
1. What version do you have? Is it a trial or full version, with all free downloads via Help completed?
2. In MEP, a collage is distinct from a PIP. Is that so in Photstory?
3. What is your timeline layout? I believed Photostory has a limit of four tracks and that to create a PIP your photos should be in track 1 and the others should initially be empty. Is that so in your case? A screenshot would be useful.
4. Is this a new problem? IOW, have you done it successfully before? Are you a new or an experienced user?