Thanks for the input. I had begun to wonder if it was having issues with where the image was located: in the .images folder under MyDocs, which I have moved to mmc1 (and linked from /home/user). It is visible to the "set background" file browser and I can set it, but - as I described - it always forgets it.

It turns out that I can have it on mmc1, just not in the .images folder! I made a folder called .backgrounds (still under MyDocs) and put it there, but this folder was not visible in the file browser, so I removed the ".", and now it works! Just one of those things, I guess ...