Churchill is correct. But FIRST, you should go to iTunes and choose which photo albums you want to share (File>Homesharing>Choose Photos to Share with Apple TV). Then select or deselect albums you want to share, and finally Apply the changes.
Now this won't affect the screen saver because the Apple TV has an onboard memory cache of your previous photos. Ever notice that even when iTunes is not running, your Apple TV screensaver still kicks in and works?
The way to get the Apple TV to refresh that cache is ON THE APPLE TV, go to Settings>Screensaver and select a different set of Photos (e.g., Animals or Flowers). Do a Preview of the screensaver, and you should see the new photos. Now, select your own Pictures folder that you want for the screensaver (iTunes must be running, of course). It may take 5 minutes for the Apple TV to load the new set of photos into its onboard cache. Do a Preview again, and you should see pics from the photo library.
Yes, the ATV cache is limited, so if you have thousands of photos, it is likely you'll only get a sample of them in your ATV cache. I would imagine that Apple has had to set a limit to the size of the cache so that it does NOT have to continually stream photos for the screensaver, which might disrupt other functions such as music playback from iTunes across your home network. For a $99 device, the ATV 2 would need to have to set some limits on its onboard memory. (The original Apple TV 1 had its own 160 GB hard drive, where you could store your photos, music and movies. You could play back music, see photos, etc. on this Apple TV 1 without having iTunes running at all on another computer at the same time. That's because the ATV 1 was essentially a stripped down Mac Mini with an internal hard drive, and as I recall, it cost over $325 originally, when Mini's sold for about $500 at that time.)
So, in summary, there are 2 things you need to do. First, change which photos to share in iTunes on your PC or Mac and apply the changes. Second, on the ATV get it to refresh its memory cache by selecting a DIFFERENT source of photos, and then do this again and reselect your wanted new albums. BTW, you can always see ALL your photos on the Apple TV by just normally viewing each album that you have elected to share via iTunes.
If you are really concerned about the limitations of the ATV 2, and still want to stay with Apple and can afford it, get a Mac mini with a Bluetooth keyboard and touchpad. Then you'll have a whole computer with its own hard drive. Hook the Mini up to your stereo system and use the HD TV as the monitor. That's what I decided to do several years ago, to put a Mac Mini at the heart of my entertainment system and have it run iTunes all the time (and my very large music collection is stored on an external 2 Gb hard drive connected to the Mini). And for convenience, I still use the ATV 2 for listening to music, watching movies, Netflix, etc.