From Finder you can then drag in the .xcodeproj projects for both the static library you want to use, and the new app you are building that uses the library. See Apple Docs for more info on setting up Workspaces: http://developer.apple.com/library/ios/#featuredarticles/XcodeConcepts/Concept-Workspace.html
Static Library Project Settings
Make sure all the static library's headers are set to copy to "Public". This is done under the settings for the static library target > Build Phases. In the "Copy Headers" phase, make sure all your headers are within the "Public" section.
Next go to Build Settings, find "Public Headers Folder Path" and type in a path for your library. I choose to use this:
I've adopted this from use with RestKit and found it works best with all my static libraries. What this does is tells Xcode to copy all the headers we moved to the "Public" headers section in step 1 to the folder we specify here which resides