It works fine in the demo. You make a backgrounds folder in the pictures folder, you make a folder in that called whatever country you want to call it, and in there you place the JPGs, along with an XML file. You can make two kinds of backgrounds, ones that appear when you click on a team, and ones that appear when you play at that team's stadium on a matchday.
This is an example from a config.xml file for a normal background, seen whenever you click on a team:
<record from="arsenal2" to="graphics/pictures/team/602/background"/>
This is an example from a config.xml file for a matchday background, seen whenever you play a match at that team's stadium:
<record from="england/arsenal2" to="graphics/pictures/stadium/602/background"/>
That should get you started