It is doing that because the image width is smaller than the slider width, therefore it is resizing the image width to fit the slider. When it does that, it also makes the image height smaller, which is why you are seeing the content box appear to go outside of the image. Until I completely redo how images are processed for the slider (which is on the list for a future release), there isn't a way to fix that unfortunately.
EDIT: When making image specific for the slider, remember to take into account the slider margins, as the image will need to be slightly smaller than the slider size, as defined in the StyleVars.