If it were me, I would create the image in Photoshop (with the top of the head protruding from the circle). Then, I would place the image into a regular rectangular InDesign frame. This way, I could retain the small hair details.
However, if you want to do it in InDesign, draw a circular frame. Place the photo into the frame. Use the pen tool to add anchor points to the top of the circle while positioning them to correspond to the edge of the hair. See below.
