Condition: image size should be smaller than 250kb and should be of good resolution.

1. Copy the desired image to this location:
    C:\Windows\System32\oobe\info\backgrounds
and if this 'background' folder is not there, create one... and rename the image to
backgroundDefault.jpg

2. Now open Registry Editor... which can be done by typing 'regedit' in the start menu.

Search this key in the registry editor:
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Authentication\logonUI\Background

$. DoubleClick the key OEMbackground
 and change the value from
     0 to 1...
and if the Background key isn't there then create a dword key with this name and set its value to 1.

All done.. Now, if the image was valid, press ctrl+del+alt to see the change.

And if you prefer, an easier, faster and good way of doing. A free tool by the name windows 7 logon background changer is available.