Take measurements of CD label paper for the cut dimensions and positions.
I used Neato CD label paper, so your dimensions may vary.
Open new document 8.5 x 11 inch with 300 dpi resolution.
Fill background layer with new color to distinguish it from the template layer
Make new layer and fill with white. Turn on View Grid. I set grid for 1 inch with 8 subdivisions.
Use the ellipse marquee tool with parameter set for 4.625 inches
and set two circles in the correct position.
Snap to grid helps for the outer circle, since the dimension is an exact 1/8 inch.
Change marquee to the Subtract option and select the center "holes", 1.5 inches.
I used dimensions that are slightly beyond the actual cutout
so that images will be full bleed with no visible printing edges.
Erase the selected area to expose the background layer. (Delete or Backspace key)
Make text layer just above the background layer and type any important reminder instructions.
Merge the type layer down into the background layer.
Save for future use.

To make a label, move artwork image onto the template image.
Move the artwork layer below the template layer.
Resize as needed with the Transform or Free Transform tool
If you are going to print both CD windows at the same time, repeat process with 2nd image
and use the erase tool to eliminate any visible overlap in the adjoining window.
Only the image will show in the circular template on a white background.
Print.