I presume your Nokia will have similar functions to mine - mine is a N95. Open up the image and then click "options". In there, there should be something named, "use image" (or something similar). Click on that and hopefully in there, there will be something named, "set as wallpaper".
Thanks gizmonster but there's no phrase as such, just reply,reply to all, delete, use detail which means save the number, forward -which means send it on, edit, move -to saved folder, and copy as template.
I'm baffled.
It could be that it doesn't show at the moment beacause it hasn't been saved. If "move to saved folder" is an option then I'd go for that one and once it's in the folder you may get an option to "use Image"
Because some of the options are "reply" and "reply to all" - this implies that you're viewing the image directly from a MMS (multi- media message) and as Camioneur stated you need to save it by choosing the, "move to saved folder", option.
Once it's been saved, go to the folder where you saved it and go through the options again - this should now work (touch wood lol).