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Originally Posted by Graymalkin
Preview and Photoshop are probably respecting a color profile stored in the image. Finder might not be doing that and as such doesn't make it look as nice when it makes it the background image. Other than that I have no idea.
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I'm now certain this is the problem. Finder is using my calibrated profile while photoshop is using the embedded sRGB profile. I took a look at the image in iPhoto again and it looked about the same as it did on the desktop. I like the look of the photo in Photoshop better but I guess I can deal with how it has come out.
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Originally Posted by BearOso
Not sure if this will work, but try saving it as PNG from Photoshop and test that. Tiger has some issues where it is blurring and fading certain jpg files.
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I did try this and the background looked the same. Thanks for your input though.