Windows has a problem displaying .jpeg wallpapers especially WinXP. Windows98 could do it better, but you needed to turn on Active desktop. What I do is change all the walls that I want to use to the .bmp format.
Sometimes, even if the windowblind contains a wall, it is misnamed, or it uses the .jpeg format and therefore, it won't load.
Here's the solution. If the windowblind skin contains a wall, and you want the wall associated with that skin everytime, do this. First, open the WB skin folder and find the wall, even if you have to click every image. Once it is found, check the extension. If it is a .jpeg, use a graphics program to convert it to .bmp. Paint shop will do it easy enough. Windows use to use the C:\windows folder by default, so I just save all my .bmp's there. Once saved in the correct format, it will appear in the display properties, desktop tab, under backgrounds.
Second, open the skin from display properties with Skin Studio. It is the first button next to the skin name in the appearance tab. Click the Skin Studio button, and Skin studio will open the skin for editing. On the left window, in the explorer tab, you will see miscellaneous. Click it and the click Personality in the drop down. Then on the far right you will see, a new window that says section. In it you will see backgrounds with a plus tab. Click the plus tab and it will expand. There you will see the name desktop wallpaper. This is what you want. The name probably doesn't match the wall, or it references a .jpg image(which won't work as explained before), or it may not reference a file at all. Click and highlight the desktop wallpaper selection and then go to the bottom section that says adjusted image and click the import image button. Hold it and select "browse for pre made image". Use the pop up window to find your saved .bmp wallpaper and select it. Once selected, the desktop wallpaper section will show it, but it will have a red slash over it. If you click file and save from the top tool bar, it will be saved permanently with this skin and copied to the skins folder. Then, anytime you use this skin, it will use the wall assuming you have the button checked that you mentioned. You can click tools/windowblinds/reload curent skin to see if it worked. Close Skin studio and Wahla that's it.