There is nothing wrong with the Nivo Slider itself. It's working the way it was designed. The issue lies with the images. Nivo Slider requires all images to be the exact same dimesions, and NOT .png (though .png does work, you're seeing the reason they don't recommend it).
Your options are to either make sure all the images are physically the same dimensions by stretching them, or add white (or another background color) around the image to "fake" the way the image looks and assure they are all the same dimensions.