If you are comfortable working in the registry, your problem can possibly be solved if you look here.
HKEY_CURRENT_USER > Control Panel > Desktop
This is where the settings are for your Control Panel Desktop Settings. The "Wallpaper" key might be pointing to your ..../MyPictures folder. Deleting the key value should restore it back to default settings.
I looked in my Registry and my Wallpaper key has no value in it.
The other option is to search for MyPictures in Registry to see which keys are pointing to it and then determining if one of them is for the WallPaper default.
At the end of the day, if this doesn't work, you can always hit the "Browse" button in the Desktop settings to manually choose your wall paper. Since you probably don't have a need to change this often, it is an okay work around.
Hope this helps!
Edited by Elixer, 09 October 2005 - 12:48 PM.