The quick way to do this is to go into Settings Application >> General >> Wallpaper. This will show you all the pictures you have on your iPod. Selecting a image will display it in full on the device screen and give you the option to move or scale (pinching the screen to shrink or reverse pinch to expand) the picture as well as two buttons on the bottom to either cancel the process or set the current picture as it's shown on the screen as the wallpaper.