Can I put a picture on a frosting sheet over fondant? If so, how is it attached? Does it blend in without the line of the sheet? Any help is appreciated. Thanks!

Sure you can!
You can either attach it with a light mist of water or a thin layer of piping gel. Personally, I would use piping gel to get a firmer attachment. Smooth it from the center outwards to the edges making sure the edges adhere and you should be fine

I do it all the time. I just moisten the fondant with a damp paper towel, then lay the image on.

No, the edges will not really blend in. If it's a small image that will be placed on the cake, glue the image to the fondant then cut out the image and the fondant together.

If you're going to place the image onto a fondant iced cake, you'll want to make a border of some sort. Or, you can cut out the image in an interesting shape so the edge that is showing looks deliberate. For example, cut a heart around the image, or a starburst. This will only work if you have enough excess frosting sheet to cut around.