Windows 7 Home Premium Unable to change background/see thumbnails

I am running Windows 7 Home Premium 32bit. I am unable to change my background and am unable to see thumbnails. I have added a screenshot of my personalization menu to show the problem. I would like to be able to make it so my themes/thumbnails show and so i can change my desktop background at will. Not looking for just a quick fix. Wanting to fix the problem.

see this for the thumbnails.
http://www.sevenforums.com/tutorials/11738-thumbnail-previews-enable-disable.html


See below for the theme issue.
http://www.winvistaclub.com/t200.html

I know little about themes, but here is how I change my wallpaper.

Make a folder anywhere, call it "wallpaper".

Put a bunch of jpegs in it.

Go to Personalize.

poke or double poke "desktop background" as shown at the bottom of your screenshot.

A window opens up.

In the "picture location" dropdown, navigate to that wallpaper folder you just created.

You should see thumnails of each picture in the folder show up.

Choose "select all" if you want to put them all in the rotation.

Experiment with "picture position"; I use tile.

Choose something under "change picture every". I use every 3 hours.

Save changes and exit.

If you want to change manually after that, right click the desktop and choose next desktop background.