I have also found that if I use the built-in "Appearance" utility within the default sharp rom to change to a 640 X 640 wallpaper and select that wallpaper while in landscape mode, it will work OK. Then you can shift back and forth between landscape and portrait and wallpaper will display correctly either way.
The only "gotcha" seems to be that if you reboot the Z, then you have to re-select the wallpaper while in landscape mode again.