If you're going to do this then do it right and have the image extend into the top bit of the frame and use transparency where you can. As an example of what I mean here's a theme I just made because I wanted a better one than the one I made a year or so ago using a picture that was both the wrong resolution and low quality.
I make my themes using this website;
http://www.themebeta.com/chrome-theme-creator-online.html I'm no expert at this, but I imagine that this site provides pretty solid basic functionality. You can probably do some other things when you're making themes manually, though.
