Mo,
head.tpl is indeed the right place to be editing... but it is a nested table in a nested table -- by default, head.tpl is a MESS
THEORETICALLY, you should be able to edit xlogo.gif -- in fact, I suggest you do this. RENAME IT to modibaba_logo.gif, make it look like what you want, but for now, keep the size to 67px high x up to 600 wide.
FIND:
<img src="{$ImagesDir}/xlogo.gif" width="244" height="67" alt="" />
REPLACE WITH:
<img src="{$ImagesDir}/modibaba_logo.gif" width="
width-of-new-file" height="67" alt="" />
UPLOAD modibaba_logo.gif to /skin1/images
CLEAR YOUR browser cache, as well as run cleanup.php
http://www.yourdomain.com/store_location-optional/cleanup.php
better now? There are MANY THREADS up here about editing your header logo.
The trick with this is to USE webmaster mode, find the exact template you need to edit, then if you need to clarify an insane nested table structure, a tool such as dreamweaver can help sort out the nested table insanity. If you have the skills, lose as many tables as you are comfortable eliminating. Your code will be cleaner and it will render faster.
Hope this helps.