The Shape of the Border is Nice, but it just looks too flat. Try doing this:
Duplicate the Border layer,
Select "Alpha to Selection"
on the Boder Copy Layer, Fill the selection with white
set "Layer to Image size"
On the WHite Layer, do a Gaussian blur Effect (Blurring by 8 pixels works nice).
Hide the white layer,
Bump-Map the Grey layer on top of the blurred white layer. That should give it a nice, rounded, feel to it.
If that doesn't show up well, Make the white layer (even painting over the grenade), gaussian blur it, set it on top, and set the blending mode to "Multiply".
Let me know if this works.
Regards,
Jack