This solution is working for me:
1. Download HDWall_ver27b.zip from
http://forum.xda-developers.com/showthread.php?t=503511.
2. Unzip the file on your computer - not your phone. This will create a folder titled 'HDWallS'. NOTE: DO NOT install HDWallS on your phone - you do not need this.
3. Start the HDWall.exe program on your computer.
4. Click on 'Config' and for 'Profile' select 'TouchFLO v2.0 - No Compression - All Tabs' (If you want transparent task and menu bars then select 'WM 6.5 - TouchFLO v2.1 - No Compression - All Tabs') then click OK.
5. Click on 'Load', select a picture that you want for your background. This will open up a second window. Click on 'Auto Crop & Resize (source AR)'. This will select the middle of your picture and show you (in the first window) what your background will look like.
6. Deselct 'Display TouchFlo Interface' in the bottom left of window 2. I'm not sure this is necessary but I did this. Click on 'Apply' then 'Close'. A window will pop up asking if you want your output directory to be the same as the location where your picture came from, click yes or no depending on what you want.
6a. Your can repeat 5 & 6 by selecting 'Landscape' if you want a landscape background (I did not do this so I can't say if it worked).
7. Click on 'Create cab'. A new window will open. Under 'Application Title' in the top left replace 'HD Wallpaper' with some other appropriate title. What you type in here will appear on your phone under 'Remove Programs' so make it unique to each wallpaper you create.
8. Select 'Include Portrait Wallpaper' (and 'Include Landscape Wallpaper' if necessay).
9. Click on 'Convert'. The program will then convert your picture to the appropriate files. This can take some time so be paitent. When the popup window says 'All Done' click on 'Close'.
10. Click on 'Create CAB'. When the CAB file is created you can close this window. Please note: The CAB file created will be called 'MyWallpaper.cab' regardless of what title you inserted under 'Application Title'. I haven't tried changing the cab file name yet but I would think the actual name shouldn't matter.
**Update** The name of the cab does not matter. I've changed the name in file explorer and it still works.
11. Place the created CAB file on your phone and run it. This will change the background on all your pages except the home page. To change the background on the home page do the following:
12. Select default background for your homepage under settings.
13. Using a registry editor (I use CeRegEditor, it's free) connect your phone to your computer and open its registry. Go to HKEY_CURRENT_USER -- software -- HTC -- Manila. Look for the HomeBackgroundPath key and change its value to '0'. Save your changes and soft reset your phone.
Please note that the above procedure does not alter the slider or curtain, it only changes the background. If you want to change the background again you will need to remove the previous background with Remove Programs (hence using the unique name under Application Title) and install a new cab.
Hope this helps everyone until a better solution is devised.