If you use the fade in/out option, the code that handles it (and this has been explained a number of times if you search the forums) is an open source jscript that was coded by someone else (you can fine the author if you look thru the code).
This code does not respect the CSS positioning so if you position the header background image any where but at 0,0 in the header area, you will notice first the CSS background image is displayed, then the jscript starts to run and it positions the next image at 0, 0 causing an apparent 'jump' of the image.
You will also see that if you set the blog title to display over the image, it will disappear because the jscript overlays what is previously displayed.
Unfortunately, the author of the jscript has decided to stop supporting it, so it is what it is. I've actually recommended to Atahualpa's author (Flynn) that he remove the option.
You might try to use a plugin like dynamic headers instead.
Last edited by juggledad; Jan 25, 2012 at 04:53 PM.