Just help me to understand your problem...
When there are no windows open and you look at the desktop, you right-click on a clear place on the desktop, a little menu pops up and you select
properties. You then have access to all the tabs except for "background" (or desktop as it is called in XP?), thus you cannot change your wallpaper.
Did I get it?
Curious.
First to change your wallpaper you can try this:
Find the picture you want to set as wallpaper. Open it in MS Paint. Under the File menu, there are two "Set as Background" options. Selecting one
option should make the picture your default wallpaper.
But this doesn't solve the actual problem.
I don't have access to Windows ME, thus I can't completely help troubleshoot the problem, but I'll suggest some solutions that you can test.
I'm not aware of a "Display lock" on Windows ME. Thus it may be the cause of access rights. If the user you use to log in does not have full access
you may not have access to certain settings. Make sure that you have administrator rights with the username you log in with.
Another cause can be another program that limits access. There's a couple of programs on the market that enables you to protect certain settings on
your PC, such as
1st security agent ... Obviously I don't know the complete list of
these kinds of programs. You'll know the programs running in the background that protects your PC. Check out their options and settings to see if you
can lock the background image. I cannot guide you through this part, as I have no idea what programs you have. Some of these security programs run
silent, i.e. you'll have to check all programs that start during a boot.
A third cause could be a bad (corrupted) system file. I'm not so sure that this could be the cause as you are much more likely to get a system error.
I'm not sure which file it'll be either, but it will most probably be a .cpl file. The file "desk.cpl" opens up the display settings. In the end
you'll need to do a system file check (which I can tell you now won't pick up any problems), do a system restore or a OS repair/re-install. (Not a
complete re-format).
That's my guesses. Maybe someone else can come up with a better answer.