banner problems

I've spent about another six hours on this banner, attempting
to improve the resolution of the print I've put on the photo.
My latest idea is to put text onto a transparent background to
create a jr logo, and then to put it onto the photo in Photoshop.
It works well when I just post it onto my dummy blog, but when
I put the jpeg code into the banner section, I just get the
slightly blurry print edges time after time (despite varying a
whole host of things).

I think the problem lies with Blogger compressing photos down
too much, and when I attempt to magnify them for banner purposes,
the resulting resolution is poor. I think my next strategy will
be to put the banner up on a completely different website (not
Blogger), and then to import the code onto Blogger from there.