Try deselecting the "Apply any wallpaper supplied" option in the WB config panel > Basic Settings dialog (seen in the first screenshot you linked to) - and then click the "Apply Changes" link on the left side of WB Config panel.
Reboot computer, and attempt to change wall via Display Properties > Desktop tab (seen in second screenshot).
If this fails, try the following:
1 - Unload WB
2 - Go to Display Properties > Themes tab > select Windows XP from Theme drop-down list > click "Apply"
3 - If the Windows XP default theme is now restored, try to change the wall again in Display Properties > Desktop tab
4 - If all is well, reapply the WB skin of your choice without the "Apply any wallpaper supplied"
That should do it.
Note - obviously any cracked versions (if this applies to you - not saying it does), are fraught with possible side effects....