I would like the header image on top of the menu instead, and don't want them touching as well.

I would also like to completely get rid of the category menu as well. I got rid of most of it, but it still says, "No Categories".

Anyone know how to do that?

Thanks.

Read the documentation on the configure header option

On this site or in the theme settings? I'm having trouble finding it.

In the theme settings - the left to right order corrisponds to top to bottom

I'm still lost. I've looked up and down in the settings, in the "Header Area" in "Style & Edit Header Area" and "Header Image". I don't see anything that refers to left or right.

Am I in the wrong settings area?

Go to ato->Style & edit Header Area->Configure Header Area and read the options

There we go, thanks!

Can you point me in the right direction for putting some space between the menu and header image?

I'm looking through everything, but it's not clickin'

Use bar1 or bar2 and style it to your needs

I must be doing something wrong. Nothing I add or change to the bars, takes effect.

Do you have %bar1 or %bar2 in the 'Configure Header Area' option?
What version of Atahualpa and WP?
What is the URL?
What EXACTLY have you tried?
If you are on 3.5.1 do an EXPORT of your style (ATo_>Export/Import Style) and attach it to a response here (use the paper clip icon)

I didn't have %bar1 or %bar2 in the "configure header area"

I added %bar1, but what's an example of what I can now add in the text area?

I've tried "margin-bottom: 35px;" but nothing happened. I just want space between the menu and header image. And I want the grey bar gone.

Using the latest version. I have wordpress installed locally with, XAMPP so I can't provide a link.

Does this gray bar span the page? if it does, look at ato->body, text & links->body style and look at the jpg that is in the background CSS statement

A jpg isn't listed in the css there.

Here is the grey bar i'm referring to. It's right under my menu bar. I'm pretty sure it was there by default.

that gray bar is the separator between posts that you have defined for the post container - If you have more than one post, you will see it between them. If you want to change it look in the post options