The wizards at iPodWizard.net have hacked their way to add a background image to first-generation iPod nanos.All you need is a firmware patch supplied by the authors.

You will need the free iPodWizard utility for Windows, which, will allow you to change your iPod's fonts, graphics and text.

Maybe in the near future we might get the same hack for the 5th generation ipods. You can change your background picture by loading that firmware binary in iPodWizard and changing index 78 picture. Click Download to download the required iPod Nano Firmware. Download

Tutorial on their site..

Preview :

[ Download ] via  Background Image on Nano [iPodWizard.net]