psd->xsl-fo workflow / background-images

Hello all,
Had a question about psd->xsl-fo workflow (+ xsl-fo background-images) ...

I have a Photoshop .psd sent to me with Image->Image Size properties of:
Pixel Dimensions: 2550px x 3300px
Document Size: 8.5in x 11in at 300 px/in resolution...

I wanted to crop out the header and use that image in a static region as a
background image (plus i would have some header text overlaid onto it, hence
why i want to use a block/background-image vs a fo:external-graphic).

So i cropped out the header and set in on a header region's single block for
now, on a xsl-fo page that is 8.5in x 11in... but the image shows up WAYYYY
too big. I assumed cause it is 300px/in resolution (but i thought print/pdf
should be 300 and web 72). Anyway I changed the resolution to 72, but the
vector-y image loses quality and doesnt fit still perfectly (had to mess
with Pixel Dimensions to get it just right). Id rather just use a good
quality gif and possibly resize it within the pdf if it doesnt lose quality
that way...

So anyone have a good workflow to convert psd's?

and also is there a way i can set the width and height of background image,
so i can just use the good 300resolution header? (...maybe but not sure...
do a content-width on a fo:external-graphic and maybe do absolute
positioning on it so i can overlay text on it in the header)

Thanks for any ideas!,
Ari