You must use the local Policy settings like described here :
1. Click Start, click Run, and then type gpedit.msc.
2. Under Local Computer Policy, expand User Configuration, expand Administrative Templates, expand Desktop, and then double click Desktop Wallpaper.
If you logon with a domain user on this computer the policy's are applied in the LSDOU sequence, so your domain gpo settings are applied.
(LSDOU - Local, Site, Domain, OU)
1. It is not necessary to copy wallpaper to the client local system. You can specify a UNC path in the Active Desktop Wallpaper setting in the Local Computer Policy. However, you need a shared anonymous folder in the domain for the clients local users' proper access. (preferred)
2. You can count on the Group Policy Preference Files in the Windows Server 2008 to copy files to clients local.
- In a Windows Server 2008 domain
a) you only need to create a Group Policy Preference Files item to copy the wallpaper file to client local.
b) Install Group Policy Preference Extension on clients (Windows XP, Windows Vista)
- In a Windows Server 2003 domain
a) Install RAST for Vista SP1 on a domain joined Window Vista SP1 client and create a Group Policy Preference Files item to copy the wallpaper file to client local.
b) Install Group Policy Preference Extension on clients (Windows XP, Windows Vista)
3. You also may develop a custom script to copy wallpaper files form a central store to clients local.
Please post back if you have any more problems or questions.