There is a spyware or malware being spread recently that has hit multiple windows users. What it does is store a file on your computer and runs a .reg which causes you not to be able to change your desktop background or your screen saver.

Your background is changed to blue with a fake window in the middle:

"Warning! Spyware detected on your computer! Install an antivirus or spyware remover to clean your computer."

There is two versions of this, one is it is an image and is set to your background. The second is that it is a full screen window (with a duel screen you can view the problem easily)

STEPS TO SOLVING THIS WITHOUT GOOGLING FOR HOURS:

Download and Install Spybot - Search & Destroy

Run it and scan your computer. Then Fix selected problems

Open your C:\Program Files\ in an explorer and search for strange looking folders and delete them. An example of this is C:\Program Files\rhcc8sj0e14n

For the Wallpaper change problem if you're not comfortable editing the registry go to the link below and scroll down to Line 142 (right column) and right click on "Allow Wallpaper/Background Changes" to download a reg file fix. Save the REG File to your hard disk. Double click it and answer yes to the import prompt.

http://www.kellys-korner-xp.com/xp_tweaks.htm

Hope this solves your problem - leave me a message if you have questions