can't change desktop background

when I go to change the background the only thing I can click on is either
the color tab or the customize desktop. It won't let me preview and
backgrounds. I know i have one set. ( the beach and palm tree) but when I
turn on my computer it shows the blue color only.

b) Manually (XP -Pro) :
1. Start > Run > gpedit.msc
2. Under User configuration > Click [Administrative Templates\Control Panel\Display\]
3. There will be a value named "Prevent changing wallpaper" > Set it to "Not Configured"

--- or ---

c) Manually (XP -Any) :
1. Open Regedit
2. [HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Policies\ActiveDesktop]
3. Double click the value named "NoChangingWallpaper" > Set it to 0
4. [HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\Policies\ActiveDesktop]
5. Repeat Step 3
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If the above fails :
Microsoft Method- <url:http://support.microsoft.com/kb/921049/>

[Spoonfagle]

What if that value is not there?

I copied a picture into my default folder and then went in through the menu to browse to it - the other picture names appear but the new one does not. Does it have to be a .jpg or can it be a .bmp too?