So, I want change my wallpaper to my girlfriend's picture. I go to Control Panel - Display - Desktop, then change the default wallpaper to my smiling girlfriend's picture and save the setting. So far so good. But the new setting isn't retained after I restart the computer. What's wrong with my system?

Do you ever use a second monitor or other kind of visual display hardware (like a projector) with your computer? It may be something wrong with that setting, or something the video card is set to do...but I'm not sure.

I don't. The current monitor is the only one I have ever used. Do you think it could have something to do with the CMOS battery? Before I ever got a problem with the date and time setting not retained because of the battery. But now the time and date setting is fine.

Yes, a faulty CMOS can cause all sorts of funky problems I'm afraid. Have you tried selecting it as the background the more direct way, by right clicking on the open photo and selecting set as desktop?

Have you been able to change the background in the past? My computer was always able to and then today it actually acted up! I had to do a System Restore to get it working again, luckily it was only a restore to 2 days ago...

Yes, I tried it (after reading your post, thanks). When I restarted the computer, my smiling girlfriend showed up for a moment or so during the booting process, then she disappeared.

@ TechNewb: Yes, before I never had an issue with changing the background, and the last picture had been my background for quite awhile. My computer started acting up a month ago, I guess.

I am going to have to agree with TechNewb and say that you may need to do a system restore back to a date prior to when the problems started. It is very possible that you have picked up a glitch which can be corrected by a restore. Try this before spending any money on repairs.