Wallpaper in Windows 7 looks terrible, low quality, and colors are off

Set BMP bitmap file as wallpaper in Windows 7

How to set original BMP file a wallpaper in Windows 7
I can't believe it is 2013 and we have 8 to 16GB of RAM on computers, and we're still facing these problems.

The problem is that when you set any image as your background, windows will convert the image to a JPG with high compression.  It will place the file here

C:\Users\%USERNAME%\AppData\Roaming\Microsoft\Windows\Themes\TranscodedWallpaper.jpg

and it will just use that file to set your background from now on.  Unfortunately, you are likely to see jpeg artifacts.  Now, if you already have a JPG file, it will not do a conversion but there is an additional problem with JPG files even at the highest settings.  You are less likely to notice this with pictures, but when you are dealing with graphics with gradients, the JPEG formats are terrible handling smooth gradients.  

So the solution is to trick Windows to using a BMP as a wallpaper, not the JPG.   So what you can do is save your wallpaper to the size of your resolution.  Then simply change your extension of the file from JPG to BMP.  Then right click on the JPG file (disguised BMP file), and choose "set as desktop background".  This sounds like your computer would horribly crash, but the thing is, it is using the file extension to detect if conversion needs to be done, and it uses the mimetype of the file to read the image (your BMP file is still mime type "image/JPEG"), so it's safe, and works well.

And it's like when you put on glasses for the first time.