A much easier way thats more convincing is detailed in the following steps:

  • Create a circular marquee with the marquee tool.
  • Create a work path from said marquee. It can be in any shape, but circle for halo.
  • Pick the airbrush tool and put the settings to dissolve, size fairly large (depends on the size of your picture but a size 45 brush wouldnt be going to far. Set the opacity down to about 10-20%
  • The color you should choose first should be a dark brown, this is going to be the darkest richest colour in the fire. Once selected, stroke the path with your dissolve brush.
  • I know it may look awful now, but keep going. Pick a smaller brush, a brighter colour and a stronger pressure.
  • Stroke again. Repeat as necessary.
  • Right, now you have an awful looking ring of coloured noise. Grab the smudge tool. Set the fade options fairly high with the opacity at about 50%. The brush should be about half the girth of your noise torus. Stroke up wavily. A lot.
  • Repeat. Change the size. Smudge. Change the size again. One more time, with feeling. Alright now repeat that 5 more times and you're done. Tweak the levels a bit to get a good colour and you should have a fairly convincing halo of flames!