Thanks for replying Chrisber. Let me lay it all out there for you. Here have been my steps:
1) I uploaded my original image (a .jpg) via my host's web-ftp browser to the directory: /1546ft.com/wp-content/themes/atahualpa/images/header
1a) I removed the default images that come with the atahualpa theme
1b) I viewed my web page, 1546ft.com, and found that my header was now blank (even following a few refreshes, restarts of my browser and general waiting to see it it was just taking extra time)
2) I backtracked and deleted my image via the web-ftp browser and uploaded in the same directory the atahualpa theme default header image.
2a) i refreshed my web page, 1546ft.com, and found that the default header was now back up on the web site. This made me think that perhaps my image was perhaps too large in file size and/or in pixel size.
3) using photoshop i cropped and edited my personal image to be 1280x290 pixels in dimension and then saved the file down to 44 KB in size. (by comparison, the theme's default image is sized at 1300x160 and 44 KB. The "read-me" file that comes with the theme states that all images should be "1280 pixels wide or wider, the height doesn't matter" and that all images should "have the extension '.jpg', '.gif' or '.png'")
3a) i then deleted the theme default header from the ftp site and uploaded my newly cropped, re-scaled and re-sized image into the image/header folder
3b) upon loading the web page, 1546ft.com, the header was once again blank.
4) I decided to do some self help and brows the wordpress.org Forums.
4a) i found the following forum thread:
4b) following the instructions of the forum thread i "changed the theme folder from 'atahualpa2' to 'atahualpa 2' (with a space before “2″)"
4c) i found this to be a bit odd since that my file structure did not have the folder listed as "atahualpa2" but only as "atahualpa" but i decided that perhaps this was a problem so i changed the name of the file to "atahualpa2" as described in the forum thread.
4d) Doing so subsiquently required that i reload the theme via my worpress dashboard (since i changed the file structure tree i guess) so i reloaded the theme while keeping my fingers crossed and alas - no header.
5) with the file now re-named as "atahualpa2" i once again backtracked to check the sites functionality and deleted my image from the web-ftp server and uploaded the theme default header.
5a) i reloaded my web site, 1546ft.com, and there it was - the default theme header.
So now i am here - with my header once again blank (i uploaded my header image one more time with no luck). Perhaps a bit long winded but that is EXACTLY what i have done and precisely where i am left - wondering what to try next? For the record, i am running WordPress v2.6 and atahualpa theme v2.2
Many thanks for all of your help and suggestions in advance.