That is how it is supposed to work. The reason it doesn't look right is that it was designed for avatars that are 96px tall. it creates a cool effect where the avatar looks like it is sitting in the grass as just the bottom few pixels are behind it.
I only wrote the original html so bumpaneer might have changed it afterwards but the part you need to change looks like this:
Code:
<div id="Layer1" style="position:absolute; width:100%; height:64px; z-index:1; left: 0px; top: 156px;" class="GRASS"></div>