There is a couple of posts around the issue that the header image is not displayed.
I had the same issue so i fixed it for my blog http://profiloptimierung.de
I am not sure about the consequences so apply at your own risk. It seems the author removed the “enable image header option” from the theme options page and i am not sure why but it doesn’t look like a mistake to me.
Anyway it worked for me so it might be good enough for you so here is what you need to do (in Version 1.6.5 of the theme):
1, open theme-options.php
2, re-add ‘use-header-image’ option to the file see http://pastebin.com/AdbPs1LG line 83-89; line 418, line 439, line 467 and save the file
3, check theme options page and enable header image
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