no no no
ok look. google made it so android will take a 4:3 ASPECT RATIO image and apply it so it can be scrolled across all homescreens. This was probably not thought out completely, but thats what it is
ONLY 4:3 aspect images will work correctly. so for a HVGA screen, which is 320x480, you need a 640x480 wallpaper.
for our 480x800 screen, you need a 1060x800 image to be a native pixel for pixel fit. no up or downscaling needed.
although, any image in a 4:3 aspect ratio will work perfectly, it will just downscale to fit the screen.
thats why when u make a 480x800 image, it cuts off the top and bottom when you try to apply it as a wallpaper. the phone is trying to get a 4:3 aspect ratio section of that image but can only go so far since the image is taller than it is wide.
On a related note, I found that wallpapers with high contrast and small distracting bits make it confusing to use the phone and discern icons from the background. the more colorful the wallpaper the more this occurs. you might not notice it consciously but you'll have eye strain.
the best wallpapers stick to a solid color with a minimal pattern that repeats across the entire image subtly. nature wallpapers can get away with contrasting colors becuase looking at mountains and lakes and stuff is something we process on a daily basis and its easier to discern a icon hovering in the sky over a mountain.
Personally I like bokeh wallpapers, most I make myself. or the view through a car windshield on a rainy day. similar to bokeh, but with water drops. like the iPhone wallpapers. There easier on the eyes.
maybe I ranted a bit. oh well. hope this helps