well mate, you had it in you code I think, lemme c what i can whip up from my head again..I bet when I have finished it still wont work, but i am too lazy to actually test it out myself, ok here goes:

Code:
<html>
<head>
  <title>JS to Rotate Banners</title>
</head>
<script language=javascript type="text/javascript">
  var img1 = Image();  //global
  var img2 = Image();  //variables

function init() {
  img1.src = "img1.jpg"; //this will preload
  img2.src = "img2.jpg"; //the images

  setInterval("fPrepare()", 1500); //set the time u want
}

function fPrepare() {
  if(document.images['banner'].src == img1.src) {
     cng(img2.src); //img1 & 2.src should be visible
                    //to this function as it is global
  }
  else {
     cng(img1.src);
  }
}

function cng(imgSrc) {
  document.images['banner'].src = imgSrc;
}

</script>

<body onLoad="init()">
<img src="" id="banner" width="200" height="20">
</body>
</html>
This i am afraid isn't the best code I have ever written but I hope you can learn from it, and implement it to work better (if it works)...it is very sloppy, but the best i can do without testing it, and with no references, but I think that should all work with both browsers, after all it is very simple code. If you need more help then I will have to install netscape and try it myself.