first, you would put your image in a div so you can move it around wherever..
just play around with the numbers until it goes where you want it to.
next you would put a div for your blogs:
then you have to have a repeating image so that your blog/navigation area extends all the way down. basically cut off a section of your image at the bottom where you want it to repeat. [for an example, just look at the xanga link you used as an example] you would upload that image, then stick it into your xanga. there's a space for it at the bottom; it'll say 'background image' then have a space for you to put the url. then choose 'vertical repeat' or something like that.
again, play around with the numbers till you get it right..the width and height are the width and height of the area that your blog will go in. leave the height at 100%. then you would put your css or html after that, then after you're all done with that, close your div
thats the basics..hope you found it helpful.