Laura - I wasn't sure if you'd remember where you asked the question - so I'll do a quick post here. (maybe someone else will be interested, too. Took me a couple of days to do the research on it when I changed mine.)
To change your banner (in five easy steps or less):
1) Open up your chosen image in your favorite photo editing software.
2) crop it to however you want it (obviously for banner layouts, you may want to crop it in an oblong shape - or not!).
3) For regular sized theme layouts in blogger, save ("save as") the width of your image as "650 or 655 pixels". Pixels, not inches! For a wider blog layout, such as this one, I'd go with 950 pixels for the length. Mine is 850, and see how it doesn't fill out the frame all the way?
Blogger will accomodate a larger height in it's (boxed) frame, but it does not currently make allowances for the width. The OLM banner is 855, too, and it is too big, puffs over the right-hand side. (but I can live with it, I like the image.)
4) After you save it to the correct pixel size, go to (from your regular blog page)
Header (click Edit)
Then click "Behind Image" or "Instead of Image".
Then "Save Changes".
If you have any questions, I will certainly help if I can!