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I see nothing in the Mobipocket list of supported HTML tags to suggest that background images are supported. Probably would not look very good on an e-ink reader, or even on a monitor screen, in most cases (if behind text).
Most tools convert CSS as best they can, to the actual tags permitted for Mobipocket format, as far as I know.
Perhaps your CSS has messed with the margins for h* tags, and caused the margins to be gone? Normally, I see decent spacing before and after h* tags, when I convert HTML to Mobipocket format.
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