There is no specific image size that will fit for most people, there's no such thing. So you need to make it as big as you feel is necessary. The file type should also be whatever file type is the smallest, while maintaining a quality which is acceptable to you. Generally that tends to be a JPG or a PNG. This guy is using two background images, the stars which does repeat on the <html> and then the "content" background which is used on the <body> which again ... is whatever size he deemed acceptable.
Let us live so that when we come to die even the undertaker will be sorry. - Mark Twain
Don't PM me your CSS, xHTML, JS or PHP questions. I will not reply to ANY IE6 questions.