For differences between virtual and non virtual desktops, go there http://www.activeboard.com/forum.spark?forumID=38157&subForumID=78042&action=viewTopic&commentID=1186638&topicPage=0. I recommend to use virtual desktops, excepted if you want to use features that only apply to non virtual desktop (user impersonation, screen resolution).

1. Wallpapers are not applied if active desktop is enabled. Moreover, the wallpaper used must be located in a folder with read access for eveyone (for example in "C:\Program Files\R2d2 Software\Virtual Desktop Toolbox\Images\Wallpapers" or "C:\Windows") and must be bitmaps (.bmp)

2. Non virtual desktops are quite empty by design (you should only have the VDT taskbar; you can however execute the Explorer in a non virtual desktop using the Run dialog). You can define hotkeys to switch to desktops (one hotkey per desktop); go to the desktop properties to define its hotkey (for example Alt-Windows-Home to switch back to the default desktop). You can choose too to switch using mouse moves by editing the virtual screen properties. To display properties, you can for exemple use the Desktops Explorer.

3. Read answer to 1.

4. Yes, changing screen resolution is made through non virtual desktop and it should work well.

Let me know if you need more details.