How to select standby image?
 

I'm on the latest official firmware 1.0.00.14080.

In Setting> System management,

There are three options

power management
device lock
standby screen

I have picture on / message off in the standby screen option, but there is no where to select image.

Current, standby screen is blank.

Taken from the 650-user manual, page 84.
IIRC the 350 should be much the same:

To set as a standby screen
In the [Pictures] list, press OPTIONS -> tap [Select Standby Screen] -> tap the thumbnail of candidate picture -> tap [Done].The [Standby Screen] setting is configured from the [Settings] menu (> 94).
Tip: When two pictures or more have been selected, the displayed picture is changed every time the Reader enters the sleep mode (>8).