First off you started working with the demo settings for showing an add in the header. I would suggest you go and copy everything that is in ATO->Add HTML/CSS Inserts->CSS Inserts to a text document, delete everything there and then look at the site. You can add pieces back in to see what they do and dump any you don't need. Doing this will get the image to span the the header area.
In addition, go to ATO->Style & edit HEADER AREA->Configure Header Area and remove
<!-- To remove the ad altogether, start removing here... -->
<!-- Put the ad code BELOW this (and remove the sample text if there is any) -->
728x90 ad code here. Edit Atahualpa Theme Options -> Style & Edit HEADER AREA -> Configure Header Area and put your code inside the DIV
<!-- Put the ad code ABOVE this -->
<!-- End removing the ad here -->
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Juggledad | Forum Moderator/Support