Sorry for the long delay but there are a few issues with your code. The first is that in Mode 4 the only background that can be set up as a 16 bit bitmap is layer 3. http://answers.drunkencoders.com/what-graphics-modes-does-the-ds-support/
Next, the layers all share a single chunk of background memory and your garbage is coming from you overwriting part of the bitmap in video memory with the characters for the font and the map for the console background. A simple solution is to move the bitmap by settings its map base to 1. This offsets its in graphics memory by 16KB which leaves 16KB of room for your text layer (this only works because we cant display the entire 256x256 image on screen at once due the the resolution of the DS as 256x256x2bytes fills up all of memory bank A...to be more correct we should assign another memory bank to the main background...but since we cant see the bottom 70 or so lines of pixels of our image anyway its okay that they didnt quite make it into video memory).
libnds also has a macro to make finding the memory for your background a bit simpler called "bgGetGfxPtr(id)" which will get a pointer to your background gfx in video memory after you set it up so you dont have to try to calculate it via an offset from BG_GFX.
In all the changes to your code should look like this (I added a version of this to the libnds code faq at : http://answers.drunkencoders.com/wp-admin/post.php?post=289&action=edit&message=1)
int main(void) {
//Top screen pic init
videoSetMode(MODE_4_2D);
vramSetBankA(VRAM_A_MAIN_BG);
int bg = bgInit(3, BgType_Bmp16, BgSize_B16_256x256, 1,0);
decompress(drunkenlogoBitmap, bgGetGfxPtr(bg), LZ77Vram); //Displays/decompresses top image
//videoSetMode(MODE_4_2D);
consoleInit(0,0, BgType_Text4bpp, BgSize_T_256x256, 4,0, true, true);
iprintf("\x1b[1;1HThe garbage is up here ^^^^^.");
iprintf("\x1b[21;1HTesting the text function...");
while(1) {
swiWaitForVBlank();
scanKeys();
if (keysDown()&KEY_START) break;
}
return 0;
}