how to use the smudged tool for negative space icons?

i see a lot of beautiful, simple icons like THIS, THIS or THIS but no idea how to get the ultimate effect right. my problem is the smudged tool part - there are no details on how to use it, how to get a matching color in the picture that you want to use in the whole icon. when i use the color picker, the color doesn't match and even if it does? i still end up with an awkward cut-out like this - it's clear that the image of the girl is pasted on as opposed to seamlessly blended like the examples i showed.

i'd love it if anyone told me what i'm doing wrong, gave me tips on how to achieve a similar effect on this or just how to make negative space icons/the smudged tool in general. i've tried to find out on my own and it's a tough style to master. ty, and i'm sorry if this end has been asked recently.

i use photoshop 8.