You can't base a percentage height on a parent that has no height defined or is height:auto or its height is only determined by its content. That more or less precludes you from ever using height:100% for static elements as it just won't work and if it does work then it's because the parent has a fixed height anyway (read the css faq on 100% height for a more detailed answer).
It would be possible to place the element absolutely and it will match a relatively place parent as long as the absolute element contains no actual content other than the decoration image.
In your layout this would equate to:
However you are unlikely to get a smooth join because your top and bottom images are scaled and when squashed are no longer 18px wide and do not match your side images.
Also as you have a fixed width image in the middle of the page you will need to set a min-width on your page to match that image or the page will shrink behind the image and look odd.