I was just modifying my Desktop policy today and ran across this thread. I'm using Server 2003 and all XP clients, so hopefully this helps.
First, I used to use Active Desktop, and it seemed to respond better to JPG than to BMP. You might want to try that.
Second, if you have your PCs locked down tight, I ran into an issue with Active Desktop that prompted me to turn it off. Occasionally it would crash, leaving a button to recover Active Desktop, but the users didn't have enough rights to recover. Never could find the exact rights to open up without giving local admin, so I just turned it off. Here's how I'm set up now:
"Disable Active Desktop" - Enabled
"Active Desktop Wallpaper" - Enabled and set (I did this because without it users could right click a picture and set it, doing this stops that). Path doesn't matter because this picture doesn't actually show with the Active Desktop disabled.
Then I created and imported an adm file with the following contents:
Code:
CLASS USER
CATEGORY "JVH-Control Panel\Desktop"
KEYNAME "Control Panel\Desktop"
POLICY "Wallpaper"
PART "Wallpaper"
EDITTEXT
DEFAULT "\\jvh-wsus\Policy\Wallpaper\WALLPAPER.bmp"
VALUENAME "Wallpaper"
END PART
END POLICY
POLICY "WallpaperStyle"
PART "WallpaperStyle"
EDITTEXT
DEFAULT "0"
VALUENAME "WallpaperStyle"
END PART
END POLICY
END CATEGORY
This just sets the wallpaper in the registry. The two settings are the path (BMP is fine in this case) and the Style (0 = center). You can change these in the adm, or you can change it within the policy. Just be sure to enable these settings after you've imported the adm if you go that route (post back or PM if you're not familiar with custom ADMs).