Normal map (not quite right) outline Im not really sure why the outline of the anvil shows up on the normal map.
does anyone know what is causing it?
The outline you worry about just caused by setting Bake Margin to 16 px.

As said in manual for Render Baking:

Margin
Baked result is extended this many pixels beyond the border of each UV “island”, to soften seams in the texture.

This value should depend on margin of unwrapped UV map - not be more.