When I found a pic on a site that I wanted to use as a background, I right clicked directly on it and selected "set as desktop background"
Apparently, following that procedure does something to the file to alter or shrink it, making it look all pixelated when stretched.
However, when I downloaded and saved the file first, and then right clicked it and selected "set as desktop background", the picture was normal."
Most likely what you were getting was a small resolution 'preview' rather than the full size bitmap or jpeg. That'd give you poor 'detail'.
Bitmap format is going to be [normally] best as jpeg is a 'lossy' format...just like MP3....hence it being always smaller file size than its equivalent bmp ...