The screenshots are super helpful. Based on those, it looks like you want to replace the site title with an image but the Pictorico theme doesn’t have an option for that and the header image in Appearance > Header for that theme sits below the site title and stretches full width.
What this means is that you’ll want to make a different customization instead of using Appearance > Header since that won’t make the change you want.
To swap out the site title with an image, you can use CSS. To add CSS to an existing theme, you can either make a child theme or add custom CSS using a CSS editor such as the one that comes with Jetpack.
Here is an example using the Image-Header-to-be-used.jpg file you linked to earlier:
.site-branding {
max-width: 301px;
}
.site-title {
width: 300px;
}
.site-title a {
background: url(https://files.witnessthis.co.za/2014/06/Image-Header-to-be-used.jpg) no-repeat;
display: block;
width: 300px;
height: 80px;
text-indent: 100%;
white-space: nowrap;
overflow: hidden;
}
The first two blocks adjusting max-width and width are to give the container elements for the site title a little extra space since your image is just a little too large to fit on its own without getting clipped.
If you change out the image link in the url() function, make sure to update the pixel widths to match your image height and width. You can make adjustments to the CSS until it looks good to you.
Here is a link to the image replacement technique in case you’re interested:
https://www.zeldman.com/2012/03/01/replacing-the-9999px-hack-new-image-replacement/
