1. This is the starting image (I've clipped it once already to just have the rough outline of my daughter).
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Select the starting image and do Path>Trace Bitmap. I used the settings "color quantization, colors:8, suppress speckles 10, smooth corners 1.34, optimize paths 5.
2. Wait a few seconds and you get something like this.
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Then move the trace to the bottom and shift-select the original image so that both the trace and the image are selected with the original image on top. Like so:
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3. Do Object>Mask>Set and end up with something like this (I threw a pink rectangle behind her for a little pizzazz):
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Not real elaborate, but I think it's a pretty neat effect. Hope you guys do too.