Silly question, but it's a starting point. Do you have privilages to do so? If you are using a PC that is controlled by another user, they may have restricted your privilages.
Also, try logging in as administrator and see if you are able to do so.
For a quick fix, you can open a picture in IE and use the "set as background" function. It's a good workaround while you try to resolve the issue.
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I swear, troubleshooting is a science: the best discoveries are always on accident...