Comment 9 for bug 560130

I just posted my solution under Bug #536712. Here again:

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.

So seems that Lucid takes the same image as dektop-background and gdm-splash, all located under /usr/share/backgrounds. The splash they have pinned by a dirty trick (save a JPEG with png suffix) to force uses to see the purple stuff.

After this workaround from me gdm2setup now points by default to /usr/share/images/xsplash instead to /usr/share/backgrounds before.

Hope this helps to solve the Lucid problems.