You're setting the background of the image to another image. Which is fine, but the foreground (SRC attribute of the IMG) still overlays everything else.
.nkhome{
margin-left:260px;
top:170px;
position:absolute;
}
.nkhome a {
background:url(Images/btnhome.png);
display:block; /* Necessary, since A is not a block element */
width:59px;
height:59px;
}
.nkhome a:hover {
background:url(Images/btnhomeh.png);
}
<div class="nkhome">
<a href="Home.html"></a>
</div>