Sorry Neil,
Already tried that method and it does not work. But perhaps since I am using the 64 bit version of Windows 7, there lies the problem.
After much troubleshooting, I have come up myself with a fix that will totally remove all the old Deskscape 2 DLL files which is what is hijacking the normal Windows 7 or Vista Wallpaper control panel features.
Once you have totally uninstalled Deskscapes, cleaned all the entries out of the Windows Registry, there are three DLL files which are still running, and normally can not be deleted. The uninstall program DOES NOT remove these DLLs for some reason, which is an obvious over site by the programmers who were not ready for Windows 7, an no longer support 2.5.
How to Remove those DLL files and get Windows 7 back to normal:
If you are using Win7 64 bit.
Browse to C:\Program Files (x86)\Stardock\Object Desktop
In this folder you will see the three leftover dreamscape DLLs. You can not delete them under normal conditions.
Press CTRL - ALT - DEL and open Task Manager.
Go to Processes and Terminate Explorer.exe
You will lose the windows interface, but you will be able to open to the command prompt by going to the New Task button.
Now type in CMD to load command prompt.
You will now need to go to that directory.
At the C: prompt type CD \Program Files (x86)\Stardock\Object Desktop and press Enter
This will change to that directory.
Now once in that directory type DEL *.*
This will delete those three DLLs and Windows 7 will be back to normal.
Log off your user, under the Users Tab. Log back into Windows. Right Click on desktop, go to Personalize or Properties and you will now be able to change your wallpaper with no more prompts about Deskscapes!!
Todd