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The 60 day trial version of MS Digital
Image Suite can do what you require.

Microsoft Digital Image
Starter Edition 2006
http://tinyurl.com/28loxr
(this product line has been
discontinued but you can still
download the Starter Version
and run it for 60 days)

If you use paint.net, there is an "ellipse select" tool that would let you
copy/cut circular parts of a picture, then paste them into a new picture.

There are probably various other ways, as well (that may work in other
programs, too) - perhaps drawing a circle in some colour not in the
picture, then doing a fill outside of the circle with white or transparent?

A 'no cost' way for many, would simply be to use Word:

Insert; new drawing; ellipse to whatever 'circle' proportions you want;
format drawing object; fill effects; picture.

This way you can also build up anything else you want on the page at the
same time.

What you can achieve with Word alone, is greatly underrated.

S