Logo image issue

Inside dazzling folder – inc you will find custom-header.php.

In that file you will see function like this where height and width for image ar

function dazzling_custom_header_setup() {
	add_theme_support( 'custom-header', apply_filters( 'dazzling_custom_header_args', array(
		'default-image'          => '',
		'default-text-color'     => '000000',
		'width'                  => 300,
		'height'                 => 66,
		'flex-height'            => true,
		'wp-head-callback'       => 'dazzling_header_style',
		'admin-head-callback'    => 'dazzling_admin_header_style',
		'admin-preview-callback' => 'dazzling_admin_header_image',
	) ) );
}
add_action( 'after_setup_theme', 'dazzling_custom_header_setup' );

You can either set different size or add

'flex-width' => true,

So you will be able to use different size images as height is already set to flexible.

It is always have been like that for Custom header Images when they are being cropped. Thi is done by WordPress core itself and image should be named something like cropped-logo.jpeg