Hello DoubleHex, and welcome to Seven Forums.
Give this reg download below a try. It removes the policy settings that normally would remove the Customize tab to then restore it. Restart the computer afterwards to apply.
Hope this helps,
Shawn
EDIT: Oh I see you were doing this from a library. Yep, there will not be one there.
I have had this problem in subfolders of the My Videos folder. When I copied the folder to an external drive, setting the folder picture worked immediately. However, i found a way to change the folder pictures under the My Videos folder too.
Set the folder picture as usual in the Customize tab and apply. You will see no change. Then click on Change Icon and on Restore Defaults and okay. Now the chosen picture is finally used as filder pictue.
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