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Philip Rawson (in The Art of Southeast Asia), attributes the co-existence of Nats and Buddhism in Burma, and the co- influence of the the two in Burmese culture, to the following factors (which also partially explains the Burmese artistic preference for the crowned and the "royal" Buddhas):
"These Burmese (the Pagan Rulers) were probably the original worshippers of the Nats and transmitted their cult in exchange to the peoples from whom they learned Buddhism. The Nats are an extraordinary mixed collection of deities, including spirits of trees, rivers, ancestors, snakes, and the ghosts of people who have met a violent or tragic death. They like a peaceful life, and they can wreak destructive vengeance on people who annoy them. Originally they were numberless. But in time a canonical number of thirty-six was fixed for them, with the Buddha included as the thirty-seventh. The Nats were worshipped with orgiastic ceremonies, and trance-rites of spiritual possession. Mount Popa, an extinct volcano near Pagan, became the sacred mountain of a group of them. Even today the Nats exert a powerful influence on the thought and experience of modern Burmese.
The quality of the feeling the Burmese have for their Nats is of the greatest importance in the whole world of Burmese art; for the expression of the best work is imbued with this feeling, even the decoration of the huge temples of Pagan. It supplies the only spark of inspiration in the otherwise lifeless, colossal images of the Buddha found everywhere. The Nats themselves first appear in the art of Pagan. There was a collection of old wooden Nat images in the Shwe Zigon temple at Pagan during the late 19th century. Sir Richard Temple, the distinguished British administrator and scholar, had a set of teakwood versions carved by Burmese sculptors which is now in Oxford (Illus. 138, 139). Images of this kind must have exerted a great influence on the course of art. For in the best Burmese art a sense of mystery emanates from these disembodied presences, invisible personalities inhabiting the forest tress, for whom magic is as normal a procedure as the use of hands, and who are not looked on with excessive awe. In some districts, in every Nat inhabited tree and in every village home there is a Nat-house, made of bamboo and grass, and decorated with bright pieces of cloth and tinsel. The undulating, flame-like pointed plaques and pinnacles which adorn Burmese architecture and which celestial figures and court dancers wear on their shoulders, are intended to suggest the transcendent realm of magic and heavenly delight in terms peculiarly Burmese. The sensual opulence of the Indian version of the heavens provided the original inspiration for the Burmese version. The texts of Buddhism are full of descriptions of the palaces of the gods, but in Burmese art heaven is imbued with a gentle elegance and affection, while the Indian emphasis on the physical body is discounted.
Since these people have always lived in immediate proximity to their invisible neighbors, they are as familiar to them as inhabitants of the next village. And as Nats are spiritual beings, and 'heaven' is the region spiritual beings inhabit, the Burmese image of heaven is of a kind of vastly enlarged village of Nat-houses. The Buddhist temple, which according to Indian precedent may be a symbolic representation of heaven, is conceived as a hugely glorified Nat-house, for the Buddha was adopted as the greatest of the Nats. So the same symbols of supernatural splendor as adorn the Nats adorn the Buddha's images, and a Nat-like spirituality attaches to the ubiquitous monks in whom the presence of Buddhism is experienced as an everyday reality."
Fraser-Lu, Sylvia. Burmese Crafts: Past and Present. Oxford University Press, 1994, pp. 5-7
Rawson, Philip. The Art of Southeast Asia. Thames and Hudson, 1965, reprinted 1995, pp. 163-66
Rodrigue, Yves. Nat-Pwe - Burma's Supernatural Sub-Culture. Kiscadale Publications, Gartmore, 1992
Tettoni, Luca Invernizzi (Phot.). Myanmar Style: Art, Architecture and Design of Burma. Asia Books, 1998, pp. 150-51