Dear Dufus...

Next month, save yourself the hour or two of agony and follow these directions.

Make your blog header in Photoshop. Then resize it to 1500pixels wide by whatever pixels tall (keep the ratio the same) at 72 ppi.  Save it as a .jpg file at a level 9 for med-high quality.  Then in the blog design template, upload it directly from your computer, do not pass go, do not mess with Photobucket, or Elements, or anything else.  Got it?  Good.