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Create a halftone border in Photoshop.
Add a halftone drop shadow using Photoshop.
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Tutorials
How'd They Do That? - Bitmap into Vector
In just a few minutes you can create a vector file from a bitmap image in Illustrator. 
Oct/Nov 2005
1. To use Live Trace, place a bitmap in Illustrator CS2 using the File > Place command. You can use bmp, jpg, gif, png, tif, or even psd files.
2. Choose Object > Live Trace > Tracing Options. Use the options shown or experiment with the others to see what happens. This dialog will tell you how many paths, anchor points, colors, and areas the object contains—you can decide what you want to preview. Click the Trace button when you’re finished.
3. You can see the difference in the image, but it still looks like it’s one piece.
4. Choose Object > Live Trace > Expand, then click Trace. This converts the image into vector paths.
5. Choose Object > Live Trace > Tracing Options. Use these choices to get a blackand- white effect.
6. Result from Step 5.
7. Get a stunning effect with more than one image. A new feature in Illustrator CS2, Live Trace allows you to trace logos, sketches, scans, and many other bitmap images, tasks that used to be timeconsuming and difficult.

Butterfly image 10053691, Guitar girl image 23301641; PhotoObjects.net

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