OK what you have is a 100dpi jpg file. Not the best start but it can be worked with, firstly we need to turn this into a 300DPI image, (Don't even bother with artwork less than this DPI)
You then have to convert the black part to transparency. or at least that is what it looks like to me. Never used CS2. I just quickly knocked out the attached in gimp, see if it helps you at all. There is an inch bleed room around all sides.