98lite Installed - Problems W/ Images

Hi! I recently installed 98Lite on my Win98SE system, uninstalled Internet explorer and decreased overhead. Now, just a few minutes ago, I tried to replace the wallpaper and couldn't. I tried to open the file and get an error stating that explorer.exe couldn't be found. I right-clicked the desktop, clicked Properties, clicked the Background tab then clicked Browse..., and I don't see the file. It is a JPeg file. I converted the image to .BMP, but the result is kind of large. Is there a way to set a JPEG image as the wallpaper? Or do I need to use a BMP file?

 

I have heard that by doing away with IE it does strange things to the OS. I however do not know if it does what your system is doing. Maybe someone with more knowledge then me will chime in.