So here's my problem:

I'm trying to center my list within a "navbar" which consists of a Photoshop made image that is 960px by 35px. I originally had it set as the background image for the navbar and gave it the width and height listed above.

I noticed when I added padding, the image stretched. I couldn't center my navlist in the middle of the image. So I put the height as 29px to add padding that added up to 35px total. Is that an okay way of centering navbar text? Or is there a better?

Also, how do I put some space between all the links in the navbar.

Here is the site: Untitled Document

CSS/HTML attached:

Code:
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8" />
<title>Untitled Document</title>

<style type="text/css">

body {
	background: black;
	margin: 0px;
	padding: 0px;
}

#container {
	width: 960px;
	height: 1000px;
	background: #fff;
	margin-right: auto;
	margin-left: auto;
}

#header {
	width: 960px;
	height: 150px;
}


#navlinks {
	margin-right: auto;
	margin-left: auto;
	text-align: center;
	background-image: url(nav.jpg);
	height: 29px;
	padding-top: 6px;
}

#menu {
	list-style-type: none;
	padding: 0;
	margin: 0;
	color: #fff;
}

#menu li {
	display: inline;
}

#menu li a {
	font-size: 12px;
	color: #fff;
	text-decoration: none;
	font-size: 17px;
}

#menu li a:hover {
	background: #906;
	color: #330;
}


</style>

</head>

<body>
<div id="container">

<div id="header"><img src="banner.jpg" /></div>

<div id="navlinks">
<ul id="menu">
	<li><a href="#">Home</a></li>
    <li><a href="#">About</a></li>
    <li><a href="#">Products</a></li>
    <li><a href="#">Support</a></li>
    <li><a href="#">Contact</a></li>
   </ul>
   

</div>


<div id="content"></div>
<div id="footer"></div>
</div>
</body>
</html>