check the theme.ini in the theme dir (probably C:\litestep\profiles\username\themes\themename if you left everything to the default if not the is under applications data in the doc and settings folder or finally just C:\litestep\themes\themename) if OTS2( the lastest LS Installer ) and remove the Wallpaper setting.

if it OTS then probably one of these wallpaper modules are loaded
http://www.loose-screws.com/modsearch.php?search=wallpaper&searchtype=simple
simply comment out the Loadmodule line in the step.rc of the theme like so
and that should fix the problem