Your blog looks great! May I suggest updating the site title from 'mpkdesign' to 'Mi Piace Kate' on the Settings → General page. It will be used for bookmarks and search engine listings.

I'd like for the header to fit within 660 px, same as the posts below.

I basically just overlaid the #sidebar onto the header image in the last example. Another option would be to get rid of all that other #sidebar stuff, and do this instead:

#sidebar {
  width:260px;
}
#header {
  padding-bottom: 0;
}
#header-image img {
  margin-top: -155px;
}

Try it out. :)

I'd like to move the sidebar up, directly below the page navigation so there will be no blank space between the navigation and the sidebar

This will move the sidebar in the Bueno theme waaay up. Test it out to see if that's what you were after. Note that you may need to adjust the top value, especially if you change other CSS later.

#content {
  position: relative;
}
#sidebar {
  position: absolute;
  top: -250px;
  right: 0;
}