Unable to change desktop background in Monterey

I don't know if that will work for you, but it worked for me. In the wallpaper settings, the wallpapers that didn't work had a tiny "cloud download" icon in the right corner of the preview. When I clicked it, MacOS started downloading the wallpaper and after that I was able to set it as a background.

Exactly same issue. Home directory resides on external drive, and I can no longer change desktop backgrounds. To be more precisely, I can't change to anything in "Desktop Pictures" other than the Monterey default.

However, I CAN set to a color, and I can set to images in my account's Pictures folder (which resides on the external drive).

PERockwell wrote:

I've clicked on the "cloud download" button, and it appears to be doing something that I interpret as downloading. However, once the "cloud download" button goes away, I tried to select the wallpaper. No change in symptom - the wallpaper is not used.

you can submit your Apple Feedback /file a bug report here - https://www.apple.com/feedback/macos.html

This is happening to me, too. I've tried all the bug "workarounds" that have been posted online, restarted my computer, yada yada. I didn't know how important a desktop background would be until I was stuck with this horrendous graphic. It's genuinely a distraction! I have 12.1 mojave. If someone has found a solution to this, please let me know!

Removed posted in error

Yup... just this behaviour! I really wanted to carry on using the Big Sur wallpaper, but I couldn't... only this ghastly "Monterey Graphic" came up. It seems that Monterey System Preferences really don't like you changing anything related if you have a dynamic desktop selected. So, I changed my desktop to a fixed display "Light (Still)" and then I was miraculously able to select my desktop graphic, thereafter changing it back to "dynamic" if allowed. These operating systems are so complex it's not surprising glitches slip through.