I noticed recently that DisplayFusion saves wallpapers in .jpg format before applying them, this causes noticible artifacts on high quality images even at the highest quality setting.
After looking into this it seems Windows 7 does this aswell unless you save the image as .bmp with a .jpg extension or edit the registry so it points directly to the .bmp file, otherwise it converts it to an even worse quality JPG.

Considering most users prefer quality to mediocre space savings I think there should atleast be an option to have it create bitmaps instead. The only workaround right now is to manually create and set the background image so it doesn't get compressed.