As far as I know, there isn't a way to do this without downloading an application. That being said, the MS Theme Generator (v2.0)
http://www.microsoft.com/mobile/pock...egenerator.asp is a FREE download, is easy to use, will crop and/or change the transparancy of your photo, and will let you customize the entire theme (font/background colors). It's pretty easy to make your own themes.