Default Background change does work (for me at least)
I can confirm that changing the DefaultDesktop.jpg in /System/Library/CoreServices/ does indeed work, I replaced it with the Tiger Aqua background this weekend. I recommend keeping the original in there and renaming it to DefaultDesktop.Leopard.jpg or something like that to revert to.
The specifics of the image (Tiger and Leopard defaults) are:
Resolution: 2560x1600 pixels
DPI: 72pixels/inch
Color model: RGB
Try conforming your jpeg file to those settings (the resolution is probably unimportant). A restart cannot hurt either if the setting does not kick in immediately.