I have identified the root cause of the issue. It is related to the image dimensions being used.
I tested two images—one with dimensions 7360×4912 and another with 4400×2475—by attempting to upload them as a background image in Brave. Only the 4400×2475 image was accepted. I then resized the larger image (7360×4912) to exactly 4400×2475 using Microsoft Paint. After resizing, Brave uploaded the image successfully, and I was able to set it as the background without any problems.