Display Options
It was auto-fit last night, but I changed it. By default, it'll center it in the screen and display it at the exact dimensions for the image. If the image is bigger than the users resolution, it will just be clipped off.
To customize how it's shown, choose one of the options from the drop-down list after the text box where you enter the image URL. Choosing 'Full Width' will make it expand to fit, and the other options are just basic left, right and center align while retaining the original dimensions.
Suggested image dimensions
The theme is fluid, meaning it expands to fit the users resolution leaving padding at the left and right, so there isn't a set standard for image size because it's different for every resolution. As a rule of thumb, I'd say make your banners 960px or less wide if you plan on having it centered, this way it'll display fine for the most popular resolutions. Hardly anyone is using a monitor width less than 1000px these days.
Avoid making the banner width to match your resolution if you have a huge resolution, otherwise anyone on smaller monitors will only see whatever fits in their monitor.
There is a height restriction of 420px. Anything higher than 420px will be cut off, so keep your banner height 420px or less.