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I messed with the CSS a little bit and found a way to do it with what you have.

.headerimage {
// add
display: table-cell;
vertical-align: middle;
...
}

.headerimage #form1 {
...
// remove
height: 85px;
...
}

This'll at least work in Firefox where i was testing it with the Web Developer Toolbar extension, but I'm pretty sure it works in most browser (though you never know with IE).
 
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