Hi
Your video will go onto Video Track 1 and your image will go onto Video Track 2...the Overlay track. If you have reduced the size of the image using the Scale effect then it will be smaller than the video, so place the red cursor line at any point where the image clip overlays the video and the Sequence Preview window will show the image overlaid upon the video. Note: Upper tracks (overlay tracks) take precedence over any lower tracks they are coincident with.
If you have Video Track 2 selected..i.e. the image and you are in Clip Preview mode you will only see the image... You need to be in Sequence Preview mode and then you will see what the output looks like at the cursor position.
If you want to see BOTH separately then in Options/Display tick the box marked Show dual previews and right click the image track. The Clip Preview window on the left will show the image clip (reduced if Scale has been used) and the Sequence Preview on the right will show the complete timeline at the red cursor line position.
e.g...

Note that if the image is the same size as the video frame then you will only see the image in Sequence Preview as it hides the video underneath.
If you are using the Position effect then dual previews will easily allow you to see where your overlay image is being placed.......

In what way is the image bigger than in the preview? The export should appear exactly as it appears in the preview . VP preview frame on left and exported MPEG4 in VLC frame on right... The overlay image on VP track2 is the blue sign... It appears the same size in this example........


Nat