I'm not a miracle worker, just a bit of a geek who likes challenges. :)
One thing to note: Your header image is 1278px wide. While that may look good to you if you're using a high resolution - you'll find that most people won't be able to see the entire image. Anyone using 1024x768 (most common among visitors to my sites) or 800x600 (less common these days, but still prevalent) is only going to see part of it. On my 1024x768 I can only see "Timless Parenting Advice for Tots through" -- the rest is cut off. You might want to consider resizing the image to at least 1024 in width. (If you do that - make note of the new image height and change the .headerTitle height designation in your CSS accordingly.)
The light blue band is just the second line of code that you didn't quite get commented out.
<div style="padding-left: 10px; padding-bottom: 10px; font-size: 138%; color: #eee; font-weight: bold;" ><?php bloginfo('description'); ?></div>
Comment out (or just delete it if you want) that div - and the blue bar should go away. :)
I can't help much with the adsense question, as I've never installed ads on anything I've worked on. Anyone else want to step up on that one?
Making the header image clickable is a bit trickier, since we've set it up to be a background image rather than an image on the page. You can't make background images clickable.
So... here's a possible solution:
Remove the background image from your #header in the CSS.
Add this into your header.php, under .headerTitle (and take out anything else that's there):
<a href="<?php echo get_settings('home'); ?>"><img src="<?php bloginfo('template_url'); ?>/images/header.jpg" alt="Raising Small Souls" /></a>
And I'm not a parent myself (I have the patience to do this, but not to raise kids!) but I have a very good friend who is - if you wouldn't mind me passing that offer to her, I will take you up on it.