I know i’m a little late on this, but I finally got the chance to play around with the custom header feature which rolled out with WordPress 3.0. It gives users the option to add their own custom image in the header of the site. The question was asked a few times for the last theme I created, so I decided I would enable the feature for the one I am currently working on.
Except for the last bit, all the code you see goes in your functions.php. I’ll try to explain each chunk to my understanding and as best I can.