I have not tried, but I think you can put the image anywhere. I have put it in the internal memory in the Pictures directory. Particularly I did not want to risk finding out what happens when you put it on an SD card and remove the card.
To set it a file abc.jpg
as screensaver. Select the file via the front Button and then Library (if you have folder view on, go all the way up the directory tree and then to Cybook
→ Pictures
first).
As the picture you want is displayed, click the front button and then Menu
.
Once the TAB Picture
appears (top line Fit Screen
) you are in the Picture context menu, there you have to scroll down. The last line—normally out of view—is 'Set as Screensaver`, make sure it is selected (✓).
You can have only one image as screensaver. Selecting another image, deselects the previous one.