I've had this problem too which I decided was user error. I can't recall how I fixed it. Maybe I wasn't tapping the buttons hard enough. I have found that it is much easier to prepare the photos how I want them on my computer before I transfer them to the NC. Also it seems easier to set the wallpaper if you hold your finger on the home screen and select the Set Wallpaper option from the pop-up menu rather than doing it from within the Gallery app.
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