Has happened to me too!  The 2 things it can be are that
the image is to large, or in the wrong format.
I have a i870 and it will not display a animated gif, or
formats that are to large for the display driver to shrink
to the 176x220 pixel format.
It will allow a wallpaper that the camera has take at any of
the picture size setting to be displayed, MAX at 1280x1024,
or XLarge is 640x480, or Large is 320x240, or Small is 128x96
and Wallpaper is 176x220.  When I have mine set to Max it
creates a picture that is around 93.36KB in size. Windows
show it at 92.9k (but thats nothing new!).
But when the format sizes are different than the about my i870
has problems displaying the picture as a wallpaper.  Most of
the time when that happens I use one of my Photo programs to
make an adjustment in the image an save it to one the above sizes
close to the original pixel size of the picture and save it as
a new jpg image file.  Then have thre ways to get the picture to
my phone, either email the picture, download it to the phone
using my USB Data Cable and WebJAL, or put the Trans flash card
in a SD reader and transfer the picture from my PC to the card.
JDa