your right, you do have to make some adjustments. One of the nice features of Atahualpa was that you could put php in the options. Then at runtime, Atahualpa would use the 'eval()' function to process the PHP in the option.
Unfortunately, WordPress has decided that allowing a theme to use the eval() function is a bad thing and they will not approve any theme with this in it. Flynn (the developer) tried a couple of other options that have not worked out. He was able to have the code examine some of the options to look for certain php functions, but not all.
You have three options:
1) stick with 3.5.3
2) move to 3.6.7 and change the items like
background: #fff url('<?php bloginfo('template_directory'); ?>/images/search2.gif') no-repeat right center;
background: #fff url(http://yourdomain.com/wordpress/wp-contents/themes/atahualpa/images/search2.gif') no-repeat right center;
3) wait a bit to see if Flynn releases a premium version of the theme that adds back in the eval()