Hi Peace Maker! Thanks for the compliments.
First the Banner, if you look inside the downloaded zipfile for the theme. Inside there is another zip file which contains the PSD file for the banner. You can use that to edit it to your tastes and then export the slices.
With the resulting images or image. You then upload via FTP to - your-SMF/Themes/Terra-Incognita/Images/
Replacing the original file.
If you have any problems with that or you don't have photoshop let me know and I'll try and help you out.
Now for the avatars. I Think if you have set a limit on avatar sizes via the admin panel then the theme will respect it. If you find it doesn't then let me know and I'll tell you how to fix it.