In the berlin theme, it recommends uploading a header image that is maximum 100 px. I uploaded a .png file that is 100 high by 200 wide.
It displays like this: http://zamora.omeka.net/exhibits/show/historical-figures/historical-figure-1
The recommended height is 100 pixels, but it's intended that the image be significantly wider than 200 pixels. The image you used is more suitable as a logo, while the header image is supposed to be more of a short but wide strip.
Something like 960 pixels wide is more like what Berlin is set up to display for a header image. The instructions might need to be tweaked to indicate that it's really the width that matters for how the image gets resized.