When this happened the first time, I looked in Console and found the following entry for each time I'd tried to load the Desktop tab of the Desktop & Screen Saver panel:
1/12/12 9:09:36 AM System Preferences[4134] **** DesktopPref error: DSKiPhotoRootSource -loadData TIME OUT!!! There something wrong with iLife Media Browser
I even tried deleting all cache files, rebooting, and (a very time consuming process) rebuilding the iPhoto library. Nothing fixed the problem. (This seems to be related to the size of the iPhoto library; I've only ever seen the issue on my main Mac, which has over 25,000 photos and videos, using 235GB of drive space.)
The workaround: While I still haven't solved the problem (as it seems to be a bug in OS X itself), there is a workaround. As posted by mrkgoo in this thread on Apple's Discussion site, here's what to do:
- Open the Desktop & Screen Saver panel in System Preferences.
- Click on the Screen Saver tab. You probably won't see iPhoto listed here, but just wait -- potentially quite a while, but keep waiting. Eventually, you will see a fully-functional iPhoto entry.
- Click on the Desktop tab, and bingo, notice you now have an iPhoto entry there, too.
- Choose the album you want to use for the images on each connected monitor.
- Click back to the Screen Saver tab -- if you don't, then you'll have to repeat this process the next time you open the Desktop & Screen Saver System Preferences panel.
[crarko adds: I haven't tested this one myself.]