Comment 17 for bug 536712

Got version 0.5.3 here in Lucid and faced the same problem as described here: unable to change background image.

Solution was just to create the folder /usr/share/images/xsplash which did not exist after Installation here.

Remark: until that time I had to just copy the desired *.jpg to /usr/share/backgrounds/warty-final-ubuntu.png
Yes - that's correct put a *.jpg into a file named +.png.