Well, first off, you have decided to use a Circle to so a Rectangular format? How will you see all of the video - the 4 corenrs will be cut-off by the circle?

Anyway . .

1] Use Track 1 for inserted Video reduced sized video

2] Use Track 2 for Background Video

3] T1 Track Motion - in Track Header - to reduce size of frame and reposition to sit in lower hand corner.

4] Want a Border for the insert? Apply Border FX to T1

Done.

Grazie