I just checked and while setting an image to "always on top" doesn't move it on top of a video in Preview mode in Lectora, it renders as expected (over the video) in browser (tested Chrome and IE9, Lectora 12.1).
Alister, please zip your course up (File undefined Zip), submit that zipped file to cds.trivantis.com, and submit a support ticket to support@trivantis.com. We will be able to assist you from there.
