Click Start, paste the following text into the search box, and then press Enter
Right-click the TranscodedWallpaper.jpg file, and then click Rename.
Change the file name to TranscodedWallpaper.old, and then click Yes when you are prompted.
If slideshow.ini is listed, double-click this file. Slideshow.ini should open in Notepad. Select all the text in slideshow.ini if any exists, and then press Delete on the keyboard.
On the File menu, click Save.
Close the Windows Explorer window, and then browse to the picture that will be set as the background image.
Try to apply a background picture again.