Check page 62 in the PE 770 operation manual. The manual uses the term "starting point key" instead of "trace function". After selecting an embroidery design, press "adjust", "layout" and look for the soft button that has a needle with a dotted line and arrow. After hitting the dotted line button, the embroidery arm moves around the outside edges of the selected design.
Yes, there is an outline when the design is increased or decreased.