I opened FB13282770 in October of 2023 for a very similar issue. I use (er, used) a folder in the Photo's App to randomly cycle through my desktop wallpaper, but when I select the Random checkbox, it changes to the Default Sequoia Wallpaper. If I reboot or log out/in, it changes to the Default Sequoia Wallpaper. FWIW, I am able to use a Finder folder for this, just not a Photos app folder. And the Feedback does say "More than 10" people have reported it, too. What's worse is that it seems like any photo I choose from the Photos app changes back to the default. I've resorted to only using photos from a folder in the Finder app instead.
If you do file any Feedback with Apple, I would appreciate it if you referenced mine, too. Seems as though others are having "odd" or similar issues that all might be related to something else that they just can't figure out.