First of all, take note of your header's height in 'Site Layout.' If it is 125 pixels high, make a header that is exactly 125 pixels high.
Here's a great tip for horizontal navigation: The horizontal navigation bar is 25 pixels high. So, in this scenario where you have a 125 pixel header, create a background that incorporates your horizontal navigation bar starting at 125 to 160. That will give you some space above and below your bar.
If you don't want any space above and below make it snug 130 to 155.
Click on and save this background and use on your website. Just make sure your header height is 125px.
Here's what it looks like on your Google Site
Here an example of a finished product using good background layout and design.