Backgrounds Automatically Converted to Low Quality JPEG

If you right-click on an image file and choose "Set as desktop background" or use the Personalization control panel applet to select a background image, Windows 7 will convert the background image to a low quality JPEG often introducing nasty artifacts around outlines. The following method is more of a workaround than a solution. It allows you to right-click on any bitmap image (.bmp) and really set the desktop background to that image.

In an administrative command prompt, type:

reg add "HKCR\SystemFileAssociations\.bmp\shell\setdesktopwallpaper\Command" /ve /f /d "reg add \"HKCU\Control Panel\Desktop\" /v Wallpaper /d \"%1\" /f"

reg delete "HKCR\SystemFileAssociations\.bmp\shell\setdesktopwallpaper\Command" /v "DelegateExecute" /f
 

(If you're feeling lazy, run the batch file instead.)

Now, if you right-click on a .bmp file, choose "Set as desktop background", log out and log back in again, your desktop background will be the exact image file you selected (no transcoding).

Note: Opening the desktop background page of the Personalization control panel applet will transcode whatever image you've selected. To keep the image as your background, you'll have to set it as your desktop background again after closing the applet.

If anyone has a more comprehensive solution, I'd be very appreciative.