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Any help or leads would be appreciated.
<input type="text" style="color:#555555;" size="40" value="yourvalue" onFocus=this.value=''>
UGH! No, don't do that. If you do, then ever time you user selects the field, any information he/she added will be lost.
There are a couple of ways to do this. I would suggest you google for the term "compact forms". This will provide you with the best options for a semantic, accessible solution.
Setting a background image as you propose would be quite inaccessible for anyone that is using a screen reader, or that has JavaScript disabled. It doesn't provide any semantic meaning to notify the user what the field is for, but instead relies entirely on visual cues that you can't be sure will be seen. Avoid doing it that way.