In previous site (WP 3.2.1; ATA 3.6.7), the problem with the space created by Dynamic Headers was fixed with a CSS insert. URL: http://gepiaco.com.

This doesn't seem to be working now, in a new site with a new version of ATA (3.7.12) and WP (3.6.1):

Old code:
/* Remove margin under Dynamic Headers */
#linkabletitlehtmlandphpwidget-3 {
margin-bottom: 0;
}

Try as I may, I also can't get rid of the padding above the container . I want it flush with the browser winder, like the footer. Would rather not give out URL if I can avoid it, thanks.

Are you using the Linkable Title and HTML widget? Does it have the same ID?

I notice you are using the %bar1 and %bar2, try removing them from teh 'Configure header area' option