Used it in VPC, no problem. How-To Geek wrote this:
"Microsoft nixed the background-image feature and it is no where to be found in Windows 7. Fortunately there is a lightweight application that allows you to tweak the folders. It’s not quite as convenient as having the feature baked right into the folder menus but it’s pretty straight forward to use. Head over the The Windows Club and grab a copy of their Windows 7 Background Changer. Make sure to run it as an administrator (when we tested it on a Windows 7 64-bit box the application errored out immediately if it wasn’t run as admin)."
Edit: Download link removed. Fine for a virtual maachine but I wouldn't use it on my main machine.