Try feathering the edges. Blurring only ruins it. Feather by... two pixels. That should just about do it.
Fooooooo... Well next time you cut it out, use the Path Tool. Then use "selection from path", and then "Select>Feather" And set the settings to two pixels.
I like it better than your current. ;] Creative, innovative, and a really awesome style in general. I'd vote for that hands down.