good to know that the app itself is working again correct. (error was me, i missed to remove a space)
i will surely figure out why the heck the icon is gone/wrong.
can you please capture and show how it looks on you machine (if able, with both versions installed, they do not harm version 1, so you could have 3 openwallpaper entries)
or does it look like on my shot?

omg LOL, blank, now i am more than confused 

a suggestion aslong i havent fixed and you like to use the new with correct icon, as workaround.
open regedit.exe.
goto HKEY_CLASSES_ROOT\DesktopBackground
there you find subkey OpenWallpaper64 and OpenWallpaper86 (and for version 1 = OpenWallpaper)
both of them got entry called "Icon"
enter there either location of version 1 .exe, should result with my dwarf icon or you can download on internet any icon you like (pay attention to 12x12 pixel limit and that it is .ICO!)

ahhh, me dummy has not caught that, version 1 would be blank aswell.
to fix: goto Registry like written above, edit the "Icon" entry and put the name in "quotes".
that should repair it.

example:
now its entry is C:\Some Where\OpenWallpaper.exe
fixed it should be "C:\Some Where\OpenWallpaper.exe"

somehow i got problems to to reproduce error.
i snapped a larger area to show you from wich folder i installed as test.
and finally how the context menu react.
sorry my bad, icon name was already in quotes, i just checked, was my first thinking when i hear that a space do problems.

please tell me, if allowed to know, in wich folder did you copy the .exe ?
the 32bit should not run from \Program Files\xyz123
the 64bit should not run from \Program Files (x86)\xyz123

I'm gonna take this problem seriously.
I'm really sorry that it worked out well at first and now new problems appear again.
Too bad you're turning down IRC, I could have a better chat with you.
I'll take care of delivering you a good product.

the application is very raw/basic indeed.
and very dumb aswell, i have not put much code in. (i tried to follow your wish, not many nasty clicks, it might eat errors to skip [YES][NO] questions, i can add errorchecking with output that you have to confirm, for now it just "do" and system "do" whatever system "does")
if you like to test, this was my yesterday last edition.
i deeply tested alot of combination, with desktop slideshow/photo/color, the last option do display error since commandline would be empty.
i tested from folder with spaces and other strange symbols, on my own machine it works like it should.
icon display works, open image works, unicode names works.
i do really hope that it does same on your machine. i will not rebuild 64bit, when i started this problems begun.

i will not rebuild 64bit

i do if you say that this build works flawless.

/edit
if only the icon represents the problem for you, you can modify registries Icon with "shell32.dll,324" that value, this would be same like you showed me on a photo earlier

just to be sure, the last version that works flawlessly, also with spaces and icon in context menu on your machine, yes?
(if so, that'll be my template for greater tool)

32/64 bit there is no advantage between, since it open external tool, tool can be both aswell

*OFFLINE*

yes, now all is well