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The theme is set to have a set height header image Even if you don't have a block so I changed the header block to an if statement so that it only has a set height if you add a block with your header image.
<?php if ($header): ?>
<div id="header_block"> <!--START HEADER BLOCK-->
<?php print $header; ?>
</div> <!--END HEADER BLOCK-->
<?php endif; ?>