I am running ATA 3.5.1 and WP 3.1. I uploaded the new ATA 3.5.3 version, but when I activate it, my header image disappears. http://thaihealingmassage.com
What could cause that?

Did you copy your images to the atahualpa353/images/header folder?

No, I did not realize I had to do that. With my previous ATA update, the header image did not disappear.

If you installed the new version in a new folder atahualpa353 then you do have to copy in the images.

Is there a way to install a new version in such a way that I do not need to copy all my images over? And is there anything else besides my images that gets lost if I installed the new version its own folder? What is the correct or best way to install a new version?

See 'HOWTO: upgrade Atahualpa to a new version' (http://forum.bytesforall.com/showthread.php?t=8520) in the FAQs

juggledad, when you get a chance, you might add a bit to your HOWTO: upgrade Atahualpa - http://forum.bytesforall.com/showthread.php?t=8520 - to say something about what other files may need to be moved into 3.5.3 - e.g., header image(s), etc. Several people seem to have stumbled over this one (including me :-))

In my case, I've made a considerable changes to the header at http://raceskitrader.com so I have to update manually and copy several image files over - once done, works perfectly!

taken from the 'HOWTO: upgrade Atahualpa to a new version'

D) Copy in your images, deleting the supplied images
at this point, you can copy in your favicon, delete the theme supplied header images and add your own images into the header.