WB up to 2.1 cannot use pictures, only patterns.
WB since 3.0 uses datatypes to load pictures. By default there is only IFF ILBM datatype installed. But you can add datatypes for PNG, JPG, GIF, whatever you like.
Read the requirements carefully. Many recent datatypes need OS 3.9 and/or 68020.
Also be aware that decoding image files needs a lot of processor power. A 68000 might need a significiant time before the image is shown.
Similarly the background picture needs quite a lot of chip RAM. So don't be surprised if half of your memory is gone when you've managed to install a wallpaper.