Cisco 7970 phone
The image file is a simple black and white file that I made in MS Paint with the word test on it.
test.png is 320x212 pixels
tn-test.png is 80x53 pixels
all 3 files wer uploaded to the TFTP directory as shown in the screen captures List.jpg and Test.jpg (attached)
I restarted the TFTP server and reset the phone.
Pressing Settings->User Preferences->Background Images results in only one thumbnail being shown (the default image) and the message "Selections Unavailable" being displayed.