In your mastercss_withfade.css file, you have a global img rule that is affecting the img tags using in PowerGallery.
img {
margin: 0px;
bottom: 0px;
padding: 0px;
}
Removing the bottom:0 fixes the PowerGallery image positioning. FYI, I used firebug to inspect the image and it shows all CSS that is applied and what file is comes from.
-justin