If you want to redraw the picture with the hole you can create a round clip region, select the region into the hDC you are drawing on, then redraw the picture, and remove the clip region and delete it. Optionally, create round clip region XOR'd with the size of the image and fill the region with a solid color.

Option 1 APIs: SelectClipRgn, CreateRoundRecRgn or CreateEllipticRgn, DeleteObject
Option 2 APIs: Same APIs as above + CombineRgn, CreateRectRgn, CreateSlolidBrush, FillRgn

If this sounds 'greek' to you, maybe more details would help.