Many sites that have images as links use text and indent it, example:
HTML Code:
<div id="servicesb"><a href="services.html" title="services">Services</a></div>
Code:
#servicesb a {
text-indent: -9999px;
}
Then the text is there but it's way to the left so you can't see it unless you have a ten foot screen. This is good since some people use screen readers to view websites and the screen reader won't "see" your image link but it can read the text, no matter how far indented it is. I guess this is good for SEO but I'm not sure about Google since they do things differently from other search engines.
In my opinion, this is not very semantic and I prefer to just have text instead of images. With a bit of styling you can probably accomplish what you have with images.
Regarding your second question, it doesn't matter, as long as you specify the correct path.
Good luck!
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