Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
Look at that we're both from Portland!

Well I'm not going to be a lot of help on this, but I would check to see if you have something like pathfinder running, or anything else that might try and take control of your background. Then try and find a plist or something somewhere that controls your background and delete it.
 
Does it think its changing? Or does it just give you an error message.

It does the beach ball thing and freezes then closes and prompts me to tell Apple. (Which I do.) I'll do the PRAM thing. Heard of it but couldn't remember the name.
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.