Image by webmove via FlickrHave you heard of FotoFlexer? It's very similar to Picnik and I gave it a try tonight to see how it worked. I specifically needed to cut out a face and place another face (cut out) in the photo where the original face was located! It was a snap to complete! I managed to do 5 pictures with ease! I see it has a ton more capabilities to use including a merge feature which I'll be trying out next! If you like Picnik, you'll like FotoFlexer. I do think that navigating around FotoFlexer is a bit easier than Picnik and I like the step-by-step instructions provided in FotoFlexer with their features once you initiate one (like cut out a face).
I'd really recommend giving it a look! I know you'll be happy you did!