This seems to be confirmed, and expanded upon at this link. Please note
that it affects distros other than Ubuntu. Still, the solution proposed
in this thread seems more elegant than the one listed above. Perhaps it
should be edited accordingly by default in the next version of Ubuntu,
so that users can configure their background through the GUI and gnome
won't draw a background that can't be edited from gui.

http://gnomesupport.org/forums/viewtopic.php?t=2366

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[Gutsy GDM] Login Window Config tool does not change login background
https://bugs.launchpad.net/bugs/160349
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