This thread is SUPER old but...
Apparently this bug is STILL around years later.
If you're having issues using anything but the "Fill" option for a particular desktop background, you probably (like me) just right clicked the image from Windows Photo Viewer and selected "Set as desktop background." This is where the bug comes in. If you go in to change how the image is displayed, selecting "center" or any of the other non-default options, it does absolutely nothing.
Here's how I fixed it:
1. Right click your desktop.
2. Select "Personalize"
3. Click the "Desktop" link along the bottom of the window
4. Click the "Picture location:" drop down menu (where you can browse different folders)
5. Make sure "Windows Photo Viewer" is NOT selected.
6. Check "Downloads" and/or "Pictures" for your image.
7. If the image is not in one of those two folders, move it there.
You can now select center, tile, or any of the other options and they'll work!