Yes, but there's a difference between "will find" and "will display at or near the top of the search list", especially if your search terms generate a lot of hits.
Certainly including relevant text in the <TITLE> tag is a very good idea too, and if the text in the page heading (that you want to render as a graphic) is present somewhere on the page it will be indexed. I was really thinking of Google's page ranking system, which decides the order in which Google displays its hits. For that, text appearing in a <H1> or <H2> tag counts very highly if it matches a search term, but is invisible to any search engine if it's a graphic.

Yes, the Mudcat Café home page does have a graphic logo, and that is useless to a search engine. It's mitigated by the page title (as you point out) and also by the fact he the words "Mudcat" and "Café" appear several times on the page, sometimes together, as plain text.

Anyway, your suggestion is not as bad a having the entire text of a page done as a graphic, which is far worse but I've seen it done!

Anahata