Ok, I'll try to describe how I do it the best I can. Be aware - I have no training in graphic arts and taught myself to do the things I do. So I'm not very good at explaining things of this sort, but here goes:
Let's use this one -
http://www.englandforall.co.uk/images/culture/coat-of-arms.png - that I already did for you as an example. First, save that image to your computer. Now open -
.: Sumo Paint 3.6 :. - (a free, online image editor) and open the saved pic from the "File" menu at the top left. At this point, you may or may not want to resize the image. In the one I did for you, I did by 50% or so. To do that, go to the "Image" menu and select "Image Size". Make sure the "Constrain Proportions" box is checked so that the image doesn't get distorted, and then change the size as necessary. When you're happy with the size, go to the "Select" menu, and "Select All". Then go to the "Edit" menu and "Copy".
Next, save, and the open in Sumo this handy dandy 960x800 wallpaper template -
960x800_wallpaper_template.png. The red vertical area is what will be visible on the center screen of a scrolling wallpaper or the only thing seen on a static wallpaper set-up (assuming you drag the phone's crop box to it's max size when setting it as your wallpaper). Now, while making sure you've got the template you just opened selected (click on the top bar of a picture to make that the one you're actively working on), go to the "Layer" menu and select "New Layer". Next, from the "Tools" selection area on the left of the screen click on the "Paint Bucket Tool (looks like a paint bucket - if you hover over the various tools, a text tip will tell you what is what). Make sure black is selected in the "Color Picker" area to the right, and click anywhere on the new layer.
Still with me? OK, so you should now have a 960x800 picture with 2 layers - template and all black. In the lower right is the layer area, where you can click to select which layer you're working on, as well as hide layers (click the eye to the left of a layer to hide it) and also arrange layers just by dragging and dropping. For the next step, let's hide the black layer, so that you can see the template layer to use as a positioning guide. Now go to the "Edit" menu and select "Paste". You now should have a 3 layer image with the coat of arms centered and only the template visible beneath that.
Now select the "Move Tool" from the tools area (looks like an arrow) and move the coat of arms to the desired position. Got it where you want it? Good - you're in the home stretch! Un-hide the black layer - don't worry about the template layer, since it's behind the solid black layer, it wont be visible - then go to the "File" menu and "Save to my computer". When prompted name the pic and select either PNG or JPG, click "Save" and you're done!
Whew, right? I know I made that sound like a lot, but really, it's pretty easy. Give it a try and I think you'll agree. Good luck, and let me know if you have any questions.