In testing out invoice generation, I discovered that when you edit the letterhead.tex in the database using the UI, any changes you make are ignored.
By examining LedgerSMB/Template/LaTeX.pm, I noticed that INCLUDE_PATH appears to be hard-coded to templates/demo, and, sure enough, editing templates/demo/letterhead.tex does change the result on invoices, etc.
https://github.com/ledgersmb/LedgerSMB/issues/854