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It's tough to comment on the color scheme because we don't know what it will look like with content in it.
You should definatly try and get a higher quality image to work with. If you're going to use an image as the focal point of a design, that image needs to great because it's the first thing people are going to notice when they come to the site.
I don't know if the faded image in the background is really neccessary because once you put some content in the page, you won't really be able to see it, and at that point it's just adding to the download time of the site.
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