Thanks ckj,
I got the backgrounds working, the Touch actually uses 3 GIF files.
tdywater_800_480.gif - the background
tdwater_800_480.gif - background for the Touchflow panels
stwater_800_480.gif - menu background
The Samsung i760 (Verizon, WM 6.1) uses the first and last of these -- tdwater_800_480.gif is not needed since there is no Touchflow or equivalent. Both tdywater_800_480.gif and stwater_800_480.gif need to be changed. (It occurs to me that mixing and matching might be interesting.)
My phone is currently set to the red, default Verizon screen. I have not tried other themes to see the hack works with those as well.
I know that for many of you this hack is now 'old hat'; but for someone like me who has had his REDFLY for less than two weeks, it's great. Many thanks to all who worked on this.