If you are just trying to make one custom block, and want to insert static code in there, then the easiest would simply be to insert all the code (slightly reordered) into your custom block. I'll show how it's done further down.
Note, you can't have two blocks made this way - as they will share javascript function names and only one of them will persist.
If you, on the other hand, wants to make themes, based on your Imageready output, then you need to understand some more code and you need to edit more files.
If you look at the body tag example you gave a few postings ago:
Here the bgcolor, leftmargin, topmargin, marginwidth and marginheight are all css elements, related to the entire pages body - not just the block.
If you want to make those changes to the entire site, then you should change it in your themes css file.
The onload property, will trigger the preloader once the entire page has been loaded - it will then load all the images needed for the mouseover function in the background. If it's for a theme, then you want to put it in the body tag in the themes html file.
Finally, the javascript part of your output. It's not written very clever, nut nevertheless you would probably want to put it in a seperate javascript file, and link to it from inside the themes html file.
About your questions regarding the <{$xoops_js}> this is where XOOPS loads the javascript functions thats available from the XOOPS system. You could add a link to your javascript file next to it.
Still, the very very easy way, is to stick all of it into the block.
I've reordered the code and have added URL's to make the code testable from here. Try to add all of this as your custom blocks contents:
<script type="text/javascript">
script>
<table id="Table_01" width="185" height="330" border="0" cellpadding="0" cellspacing="0">
<tr>
<td>
<a href="#"
onmouseover="changeImages('home', 'http://ebay.thalhalla.net/mainmenu+html/images/home-over.gif'); return true;"
onmouseout="changeImages('home', 'http://ebay.thalhalla.net/mainmenu+html/images/home.gif'); return true;"
onmousedown="changeImages('home', 'http://ebay.thalhalla.net/mainmenu+html/images/home-down.gif'); return true;"
onmouseup="changeImages('home', 'http://ebay.thalhalla.net/mainmenu+html/images/home-over.gif'); return true;">
<img name="home" src="http://ebay.thalhalla.net/mainmenu+html/images/home.gif" width="185" height="38" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('about', 'http://ebay.thalhalla.net/mainmenu+html/images/about-over.gif'); return true;"
onmouseout="changeImages('about', 'http://ebay.thalhalla.net/mainmenu+html/images/about.gif'); return true;"
onmousedown="changeImages('about', 'http://ebay.thalhalla.net/mainmenu+html/images/about-down.gif'); return true;"
onmouseup="changeImages('about', 'http://ebay.thalhalla.net/mainmenu+html/images/about-over.gif'); return true;">
<img name="about" src="http://ebay.thalhalla.net/mainmenu+html/images/about.gif" width="185" height="35" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('secretassassin', 'http://ebay.thalhalla.net/mainmenu+html/images/secretassassin-over.gif'); return true;"
onmouseout="changeImages('secretassassin', 'http://ebay.thalhalla.net/mainmenu+html/images/secretassassin.gif'); return true;"
onmousedown="changeImages('secretassassin', 'http://ebay.thalhalla.net/mainmenu+html/images/secretassassin-down.gif'); return true;"
onmouseup="changeImages('secretassassin', 'http://ebay.thalhalla.net/mainmenu+html/images/secretassassin-over.gif'); return true;">
<img name="secretassassin" src="http://ebay.thalhalla.net/mainmenu+html/images/secretassassin.gif" width="185" height="63" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('faq', 'http://ebay.thalhalla.net/mainmenu+html/images/faq-over.gif'); return true;"
onmouseout="changeImages('faq', 'http://ebay.thalhalla.net/mainmenu+html/images/faq.gif'); return true;"
onmousedown="changeImages('faq', 'http://ebay.thalhalla.net/mainmenu+html/images/faq-down.gif'); return true;"
onmouseup="changeImages('faq', 'http://ebay.thalhalla.net/mainmenu+html/images/faq-over.gif'); return true;">
<img name="faq" src="http://ebay.thalhalla.net/mainmenu+html/images/faq.gif" width="185" height="45" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('news', 'http://ebay.thalhalla.net/mainmenu+html/images/news-over.gif'); return true;"
onmouseout="changeImages('news', 'http://ebay.thalhalla.net/mainmenu+html/images/news.gif'); return true;"
onmousedown="changeImages('news', 'http://ebay.thalhalla.net/mainmenu+html/images/news-down.gif'); return true;"
onmouseup="changeImages('news', 'http://ebay.thalhalla.net/mainmenu+html/images/news-over.gif'); return true;">
<img name="news" src="http://ebay.thalhalla.net/mainmenu+html/images/news.gif" width="185" height="49" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('partners', 'http://ebay.thalhalla.net/mainmenu+html/images/partners-over.gif'); return true;"
onmouseout="changeImages('partners', 'http://ebay.thalhalla.net/mainmenu+html/images/partners.gif'); return true;"
onmousedown="changeImages('partners', 'http://ebay.thalhalla.net/mainmenu+html/images/partners-down.gif'); return true;"
onmouseup="changeImages('partners', 'http://ebay.thalhalla.net/mainmenu+html/images/partners-over.gif'); return true;">
<img name="partners" src="http://ebay.thalhalla.net/mainmenu+html/images/partners.gif" width="185" height="50" border="0" alt="">a>td>
tr>
<tr>
<td>
<a href="#"
onmouseover="changeImages('contact', 'http://ebay.thalhalla.net/mainmenu+html/images/contact-over.gif'); return true;"
onmouseout="changeImages('contact', 'http://ebay.thalhalla.net/mainmenu+html/images/contact.gif'); return true;"
onmousedown="changeImages('contact', 'http://ebay.thalhalla.net/mainmenu+html/images/contact-down.gif'); return true;"
onmouseup="changeImages('contact', 'http://ebay.thalhalla.net/mainmenu+html/images/contact-over.gif'); return true;">
<img name="contact" src="http://ebay.thalhalla.net/mainmenu+html/images/contact.gif" width="185" height="44" border="0" alt="">a>td>
tr>
<tr>
<td>
<img src="http://ebay.thalhalla.net/mainmenu+html/images/mainmenubar_08.gif" width="185" height="6" alt="">td>
tr>
table>
<script type="text/javascript">preloadImages();script>
I hope this clearifies a bit for you.