I just witnessed similar corruption on Hardy.  I was using an xpm image.
The corruption occurs on a directory with as many files as will cause
nautilus to display a scrollbar.  When scrolling down, the area becoming
visible has the corruption (side note: I have nautilus' content zoomed to
67%).

Remedy: convert the image to jpg.

Only thing is: I was surprised the image scrolls, along with the content;
that is -- it's unlike a fixed background in your browser.  Make that a
feature-request. ;-)

bjd

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Distorted folder background image when custom wallpaper (1024x768) is used
https://bugs.launchpad.net/bugs/248394
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