The default wallpapers for Windows XP come installed in "C:\WINDOWS\Web\Wallpapers" folder, so you could place them there (this is my personal preference).

You can also place them in the "My Pictures" folder for your account.

Both of the locations above are used by WindowBlinds\Configuration Panel\Wallpapers section as a default on installation, so you can use that function in the WindowBlinds configuration panel.

The "C:\WINDOWS\Web\Wallpapers" sub-directory is the source for wallpapers when using the "Display Properties\Desktop tab\Background list" to select your desktop background. The contents of "My Pictures" usually displays in this dialog after one of two things occur:

1 - you place images in the "My Pictures" folder

2 - you set a picture in the "My Pictures" folder as the background image

Note - it has been a matter of some discussion as to what exactly triggers the displaying of the "My Pictures" folder contents in the Display Properties dialog, and how one goes about disabling the displaying of that folder (due to large lists of images being displayed for users with many pictures in that folder). I have yet to see a real solution to this dilemma.