My Album artwork "screen saver" works with all versions of iTunes in stand-alone, as a screen saver, and as an animated desktop background (wallpaper). And under all feasible system configurations.
However my album art folder is "6,512,655,249 bytes (6.52 GB on disk) for 21,528 items" and can take a VERY VERY long time to load. While it's loading and resizing what it needs to the display is black as the OP describes. So maybe it's a similar problem?
Additionally, I'm on a 8-core MacPro... if I were on a "baseline early-2011 15"MBP, Lion" it might take several times longer = which might be measured in hours. The good news is that it seems like the second time it's run it only takes a few tens of seconds (on my machine).
<shrug>