Liquid Circuit: Your second interpretation, "[NUMBER] defines the number of pixels from the image's left/right/top/bottom edge that will NOT be stretched," is correct. My popup config right now is using four 3px x 5px images stretched with borders. I just added a screenshot of it (and the images) to my profile, so once its approved you can take a look.

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edit: you can just go see the image here instead of waiting, http://individual.utoronto.ca/jprindiville/Jul_21_04.png