In Windows Vista, you can't use any image as folder background. But there is a small utility which allows you to set any wallpaper as background image in folders.
Thanks to Andreas for creating "Vista Folder Background". It integrates itself in Explorer and adds a new tab "Folder Background" in Folder Customization dialog box.
This article was posted in Software Zone, Windows Vista.
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Ronald
I may have not had ample permission, and if that is the case, then i will leave it alone.
I tend to go on deletion sprees ( ADD is a curse) and should not be allowed into most of my system files without supervision 
I sure enjoy the ideas the application inspires tho. I might try again after i make 100 empty text files then recycle em one by one. I love that sound. could you tell me what file type you are using?
VG
^^ I tried with both JPG and BMP files. Both worked. May you don't have proper permissions?
Ronnell
got it install but it won't change the default green picture folder
Ronald
I will try again with the permissions since every time you tell some one that it fixes the problem
I clicked on the Microsoft MVP link and saw you were having a discussion sometime this month. Is that a Microsft Insider thing or can anyone attend? I wouldn't interrupt, just listen. 
Ronald
VG
^^ Good to know. Regarding to your MVP page question, Its Global Summit for MVPs which is organized every year.
Ronald
Ronnell
do you think it will chage default folders that are green and not brown in vista?
VG
^^ It changes folder's background. It doesnt change their icons.
Ronald
Dear Ronnell,
are you asking if the folders that are default vista glass ( transparent) and the normal windows files (that are similar to real life manilla folders) will be changed. What this is going to do is when you open one of these folders the background of the window with the folder's content will change. The folder icon will remain the same. Your "Music" folder is transparent blue but if you open the file and right click on it's background, that is what will change, not the thumbnail placed in the icon. Does that help. Also make sure that you right click on MyComputer\ then click on \Properties(in the drop down menu \then click on (the left upper) advanced system settings\ then click on the performance settings button\ then scroll down to find "use a background image for each folder type" make sure it is checked. that was my problem. good luck