Once you have the pictures you want go to the iPod Touch Settings Option. Go to the top of the second block and select General, which is rigth above Music. In the iPod Touch General Settings go to the top of the second section and select Wallpaper, which is right above Sounds. When you are in here you have two options: Wallpaper and Saved Photos. You can browse through the stock iPod Touch Wallpaper photos, or the ones you saved. Find the picture you want and press it. When the Wallpaper Preview comes up simply hit the Set Wallpaper button. It will then drop away and that picture will be saved as your iPod Touch Wallpaper.