This trick works on Windows Xp as well as it works on windows 7. Go through below post to learn this simple trick.
How to set video as desktop wallpaper ?
*.Open VLC Media Player. If you don't have it download it from Here.
*.Then Go to Tools > Preference Or pressCTRL + P and Selecet Video from left panel
*.Then Choose DirectX video output fromoutput dropdown list
*.as shown in below image .
4. Save the changes ans restart VLC Media Player.
5. Play any video you would like to set as your desktop wallpaper.
6. Then click on Video and select DirectX Wallpaper from the dropdown listas show in below image.
7. Now Minimize vlc player and you will see your video running on your desktop as wallpaper.
8. If you want your default wallpaper back then uncheck DirectX Wallpaper from video dropdown list.
9. Hope you like this simple trick..