I know Dionysian has moved on to another template, but I found the answer to his (and my) problem with resizing the header. Just in case someone else is using this template and runs into the same problem . . .

The file named logo.gif is used in the header (I suppose for the SEO benefits of image title and alt text). This image is sized 300 x 282. If you want the header to be less than 282px high, you need to shorten the height of this image.

Alternatively, you could just remove the image altogether. Of course, you would loose the SEO benefits. The file logo.gif is referenced in the header.php file.