I've had the same problem, too. I've used a Photoshop-saved .jpg and .tif picture and it won't show on the desktop. Apple's OS never had a problem with extension names, so that's not the problem. But, what is?
hmmm. weird. I've only been able to use .jpg's. But they some have looked really bad depending on the resolution of the monitor settings. The quality has been inconsistent with different settings too. Sometimes it looks better with more colors, and sometimes better with fewer, even at the same hz and px depth. Hopefully this will disappear in final release.