When selecting a photo from my photo stream as the wallpaper (on my iPad 4 with iOS 7), the wallpaper is shown as a preview, allowing me to scale and move the visible area. Unfortunately, this doesn't work for most images, e.g. ones that I downloaded to the device from the web.
Using the two-finger pinch to scale the image doesn't work at all, and moving the visible area is very slow, if it works at all.
This behavior results in weirdly cropped and scaled wallpapers - the same was working fine on iOS 6.
Is this a known bug? It seems to be related to the size of the photo - the stock wallpapers coming with iOS work fine.