In Ubuntu Natty and in Fedora 12, I have urxvt (with 256 colours), and use ImageMagick (display -window root [...]) to set the root window to a picture. When I use the transparency (-tr) option on urxvt, I get the X11 login screen background (The pink/purple one in Ubunutu, the Blue one in Fedora) and not the image that is currently on the root window. See picture at the bottom -- taken from Ubuntu but similar to Fedora.
Note that the same problem exists if I run gnome-terminal and set its transparency.
I suspect that ImageMagick is not drawing on the right X11 layer but I (and google) cannot figure out what the right option is.
Could the problem be with either the xorg configuration or with window composition?

I would be happy to use something else than Imagemagick as long as I can re-size the images on the fly (so it keeps its current aspect ratio and fits within the visible screen area) and that I can centre the image on the bottom right corner of the screen.
imagemagickactually changes the root image, and doesn't simply overlay it? What happens if you useimlibsetrootor similar? – Chris Down Sep 22 '11 at 10:11imlibsetrootand see if it helps. – Chris Down Sep 22 '11 at 11:39