Custom CSS

The following should change the inputs backgrounds to white like so http://imgur.com/3C0MVoV

.gform_wrapper textarea, .gform_wrapper input[type=text], .gform_wrapper input[type=url], .gform_wrapper input[type=email], .gform_wrapper input[type=tel], .gform_wrapper input[type=number], .gform_wrapper input[type=password] {
   background: white;
}

The placeholders are the tricky part, there are some plugins that will do it but you can also accomplish it using jQuery like so,

$('#input_5_1').attr('placeholder','Name');
$('#input_5_2').attr('placeholder','Email');
$('#input_5_3').attr('placeholder','Phone');

etc... and then use either css or jquery .hide to hide the existing field labels. And as you say you can use css to add the images inside the fields and add padding to the left side of the fields to keep any entered text away from the images.

No problem Chris

The following plugins available from the wordpress.org plugin directory will convert your field labels into placeholders
http://wordpress.org/extend/plugins/gravity-forms-placeholders/
http://wordpress.org/extend/plugins/gravity-forms-auto-placeholders/

If you opt to use the jQuery instead you would use the following

<script>
jQuery(document).ready(function($){
    $('#input_5_1').attr('placeholder','Name');
    $('#input_5_2').attr('placeholder','Email');
    $('#input_5_3').attr('placeholder','Phone');
});
</script>

Here's a guide to where to put code http://www.gravityhelp.com/documentation/page/Where_Do_I_Put_This_Code%3F

And with that you would use the following CSS to hide the field labels and add left side padding and increase the margin between the inputs

#field_5_1 .gfield_label, #field_5_2 .gfield_label, #field_5_3 .gfield_label, #field_5_6 .gfield_label, #field_5_5 .gfield_label {
    display: none;
}
#field_5_1 input, #field_5_2 input, #field_5_3 input {
    padding-left: 30px;
    width: 85%;
    margin-bottom: 20px;
}

The above figures are just examples so customise them until you get the positioning how you want it.

To add the background image you can target the inputs like so

#field_5_1 input{
    /* your normal background rules go here*/
}
#field_5_1 input:focus{
    /* your focus background rules go here*/
}

You can find out more about css backgrounds here http://www.w3schools.com/css/css_background.asp

Regards,
Richard