Uploading photos and fluidity

I am totally confused by what is happening.
My site is http://www.Drpaulgannon.com/cleanse
I want to upload an image and have it as sort of a header, even though it is actually just sitting on top of the page.
First problem: when I use the ‘insert media’ button, and then go on to upload the photo from my computer, it defaults on my page as a thumbnail, even though it is 1280x whatever. i went into the edit and nothing. I also tried doing a search for the image and uploading it that way, and nothing is coming up in the search- also not seeing anything that is in my media library actually.
Where is this adjustment and why is it only giving me the option to be a thumbnail on my page? (I do see I can go in and change the code to change the size, but that enlarges it from the thumbnail size, so not an option).
Second problem, and main issue: I finally dragged and dropped from my file on to the page itself and whala, the full sized image- and that is also a problem- the image is not hugging the container of the page, it extends beyond in its true pixel size. How can I make this image change size with the fluidity of the page (like when the page is viewed on an iPad or mobile device)?
thank you so much!
i am using Atahualpa if that helps. Not the latest version, as when I updated it a few weeks back some things went awry (I think the header was lost and defaulted to some generic nature scene that changed every 10 sec.)