Ok Richard,
Yes - I choose a different logo in the drop down, but the site does not show it.
The full path to the image shows after selecting it from the dropdown but and at that point the image should appear in the box to the right. Try it and see if yours works.
I can select the Awesome bikes image and it will appear.
OR
If I choose the Upload button and browse to the image and select it, the name of the image replaces the "Upload" button text and the image should appear in the box but it does not.
I think it is a bug - I just hard-coded it using "<img>" tags in the Home.ascx file. It really does matter to me because I'm creating a custom skin but I was curious if anyone else was experiencing this. -jf

 I'm having similar issue, I think. I click the "upload" button but then no upload dialog appears. As a workaround I attempted to manually upload my banner in the file system, but even after a refresh, my manully uploaded banner is still not available from the dropdown.