Instructions
Select "Picture Library" under "My Xbox."
Select the source for the picture. The Xbox 360 will list all of the available sources. These sources could be a portable drive such as a flash drive or external hard drive, a device connected to the machine on your home network, or a CD or DVD.
Select the picture you want as your background.
Press the "Y" button on your controller. The photo you selected will now appear on the dashboard.