Click on the picture tab (there is one for quilt, one for blocks, and one for pictures). All the way to the left on the pictures tab is a button that looks like a picture with a green arrow. Click that to import the picture into EQ7. Then click the Add to Sketchbook button.
Move to the quilt layout tab. On the right there is a Set Photo button. Click that to open the photo menu (its just like the Set Block menu.) Drag and drop the picture where you want it.