How to Create iPhone Wallpaper Using iPhoto 08
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If you have got a Mac there is a perfect Application for this, called Ensoul http://macpaw.com/Ensoul

Nice, but a huge problem is that photos transfered via iPhoto or Aperture are very grainy and look almost as if in Thousands of Colors (however, if you snapshot the screen and sync the snapshot to the Mac, it'll look perfect). I prefer to move the wallpapers manually to System/Library/Wallpapers using AFP. That way they'll stay true.