I'd like to select and edit the area exactly within the rectangle marquee.
But the selcted elements always extend to the whole element beyond the marquee. So what does "select all WITHIN marquee" meAN?
If you only want to select things within the marquee and not the things over lapping it you need to change the first icon (selection settings) on the info pallet when in the arrow tool to the second icon. Make sure you have grouping off.