Hey,
I've had a look at your site and it looks like you've installed the theme and I can see any immediate errors or problems.
To cover your questions:
1.) You can adjust the image sizes in functions.php - you need to adjust this code:
#####################################################################
# Define Thumbnail sizes
#####################################################################
$k_option['custom']['imgSize']['base'] = array('width'=>267, 'height'=>180); // backend preview size, if changed does not affect the frontend
$k_option['custom']['imgSize']['S'] = array('width'=>60, 'height'=>60); // small preview pics, eg for sidebar news
$k_option['custom']['imgSize']['M'] = array('width'=>180, 'height'=>135); // small preview pic for posts
$k_option['custom']['imgSize']['L'] = array('width'=>610, 'height'=>260); // big preview pic for posts
$k_option['custom']['imgSize']['XL'] = array('width'=>884, 'height'=>390); // big images for fullsize pages
2.) The popup image effect upon hovering over the gallery images (e.g. Site 5) is working as per the demo.
If you have any other specific questions, please let us know.
James