My desktop also does not show my wallpaper if I hide my desktop icons. Right-click > Arrange Icons By > uncheck Show Desktop Icons.
Here is my desktop with "Show Desktop Icons" enabled:
And here is what happens if I disable "Show Desktop Icons":
Notice the image icon in the top left-hand corner. It knows there's an image there to be used as a wallpaper, but for some reason won't load it.
I've tried changing the wallpapers, using wallpapers from both pictures saved on my hard-drive and just setting them from an image on a website. I've even tried changing my resolution and whatever Active Desktop options I could fine. Nothing seems to be loading these images.