This is how I positioned the folder over the chipboard pieces. The transparency helped keep things from moving but still let me see what I was doing.
As for embossing smaller folders, whether border folders or the smaller size folders made by any of the manufacturers, if you have problems with the edges of the folder being embossed, this is where using something narrower than the border folder or slightly smaller than the small embossing folder can be helpful (my examples are numbers 3, 4, 7 in the last photo)--no pressure on the edges means no lines, eh? After all, no one likes unsightly lines. ;-)
Addendum: A couple of folks have asked about the "sandwich" for the Cuttlebug. For embossing folders used with the Cuttlebug, the sandwich from the bottom up is usually A plate, B plate, embossing folder with card or card stock inside, B plate. Depending on what you use to selectively emboss, just plan on substituting that chipboard or wood die or whatever for one of the B plates (I usually swap out the one on the bottom.) and then adding shims until you're satisfied with the look of the embossing.