From
http://www.pchell.com/support/desktopwallpaper.shtmlSometimes a piece of spyware or adware can change your wallpaper background and won't let you change it back. Generally if you go into the Display Settings and Click on the Desktop tab, the options for changing the background will be disabled or greyed out. Removing the following entry from the registry usually fixes this problem.
1) Click on Start, Run
2) Type REGEDIT and Press Enter
3) Click the plus signs(+) next to the following sections of the registry
* HKEY_CURRENT_USER
* Software
* Microsoft
* Windows
* CurrentVersion
* Policies
* System
4) Look for the WALLPAPER key on the right hand side
5) Right-click and Delete this entry
6) Close the Registry Editor
Now try to change the desktop background. In most cases this will solve the problem.