This bugged me for a while. Your code is correct, but it has to be between <pageGraphics> tags in <pageTemplate>. For example:

<document filename="$foo.pdf">
 <template pageSize="(8.5in,11in)" title="$foo" author="$user">
    <pageTemplate id="first">
      <pageGraphics>
        <image file="addons/mymodule/report/lightweight.jpg" x="300" y="700" />
        ...
      </pageGraphics>
      ...
    </pageTemplate>
...

Hope that helps!