Okay, was going to give this a try but my WB/s configuration doesn't have have that option. Am I missing something here?

What build of WB?

Island Dog is running an internal build of WB which is why he has that option on XP.

Here's what I have:

WindowBlinds version : WindowBlinds 6.1 (build 46 x86)

WindowBlinds is installed correctly on this PC
WindowBlinds appears to be activated on this PC
Your machine supports per pixel borders on WindowBlinds skins.

(Default Monitor) 1 is attached to NVIDIA GeForce FX 5200

Wblind.dll 2008/02/13 16:15:20
Wbsrv.dll 2008/02/13 16:15:10
Wbconfig.exe 2008/02/15 17:39:42
Wbload.exe 2008/02/14 11:05:14
Wbhelp.dll 2007/08/27 10:54:07
Wbui.dll 2007/11/06 10:13:05
Tray.dll 2007/09/12 16:58:21
Screen.exe 2008/01/14 17:02:18

EDIT: Well then, just, never mind.   

I stand corrected as well, I thought that was the public beta version.  My mistake. 

Show off. 
I guess XP users will be reaping the benefits of Vista development soon.    

So, for anyone interested in doing this in Xp, this from the developers site:
"One feature we particularly enjoyed from Windows 98 ™ on up was the ability to change the wallpaper of a folder as well as the text color of the icons in that folder. This would help make each folder easier to identify and would bring a personal touch to my PC.

As Windows XP ™ Home/Pro was released, many have realized that Microsoft had removed our ability to change wallpaper of our folders! Shortly after we realized the trouble on our machines, we got to work on a solution. We've found that Microsoft™ did not remove the ability to change the background and text color but instead hid the interface.

It's fairly simple for anyone to add wallpaper to a Windows XP ™ folder; however, it can get very tedious if done repeatedly. We've created a small freeware utility which handles all the hard work for you: Windowpaper XP!"

It's freeware, clean, no ads, no spy ware, been using it for years. Works great on XP.
Found here: WWW Link
Hopefully Windowblinds will someday have that feature for us XP die hards!

Hey ID, is that an unreleased build. WB 6.1 Build 46 x86 here, I have no explorer backgrounds tab.

Edit: was busy doing other things and had not refreshed the page to see that this had already been answered.

The 6.09c.[b].118 new beta version has this tab and it's pretty awesome. Running just fine on XPPRO/SP2

Yep, found this option also yesterday with the update. Now to play with this some and see how it fits in with everything else. Thanks Stardock for this update for XP users.   

I like very much! Thanks SD

Am using the opacity as I wright this on XP

This used to be a feature in WB back before Vista was a gleam in MS eye. Im glad to see it back

Another question, if I might. Is this an all or nothing setting, or can you select different backgrounds for different folders? Nice to see it available for XP now but I know with "Windowpaper", I can change each folder and was wondering if WB can do that?

This is not designed to be a per folder setting though I believe if you have set a per folder background then it may override WB as WB does not use that method.

Unlike the WindowPaper app, the WB feature supports emulated transparency and applies to all folders.

The transparency doesn't work for me. All I get is a completely black background.