How do I insert an image into a Word doc header that does not appear
washed out on screen?

Headers and footers appear washed out in normal and page views. If you
use "Print Preview" you will see the header/footer in solid black. If
you need to distribute documents for onscreen reading you should
consider using PDF files instead of Word files.

Another reason WordPerfect users dislike Word. 

Headers/Footers aside, is there any way to create letterhead (logo at
top, address at bottom) where the 'header' and 'footer' are not washed
out in normal page views?

Brian:

I'm sorry, no, not letterhead that will work "properly". However, Word
users are perfectly used to the faded images. It's been this way for
years and years. :)

But proper letterheads can be made using these steps:
http://www.officearticles.com/word/create_a_letterhead_template_in_microsoft_word.htm

~Anne Troy