Okay, since IE apparently doesn't handle transparent PNGs that well, I created a separate banner image for IE based browsers. I then tweaked the lowstream theme php to use the correct image based on the browser. Everything works great, except for a minor CSS layout problem.
If you look at my page at http://www.samuraipanda.com in IE6 (haven't installed 7 yet), the image is correct, but it's doesn't quite match the width of the blog area. Further, IE insists on putting border lines even though I don't specify them. I do add a dotted line around the sidebar, but that overlays the IE border lines. I've pretty much reached the end of my knowledge.
You can see the style.css at: