OK, I figured it out myself. Here is what I did. The file that is actively used for the logon screen is located here:
There actually is no need to change anything in the registry from what I understand, but the image itself just has too meet certain requirements in terms of size and colour depth. That file is what is displayed as the Windows logon screen. Simply replace the file with an image of your choice and you're good to go.
edit: it seems you need to have this flag in the registry set in order for non-Windows logon screen to work. Just set the value to 1. If your computer has an OEM logon screen then it should already be set:
So here is a script I wrote to monitor the folder for changes. Now to give a bit of background, the whole point of this was to stop someone from remotely changing my background. A certain person kept playing a prank on me and kept changing my logon screen to Justin Beiber or something whenever I stepped away from my desk. But he accomplished this by renaming my current "BackgroundDefault.jpg" to .old or something and then copied in his image.
So my script monitors the folder for number of files. If it detects more than one file, then it empties that folder and restores a copy of my background image from an alternate location. Then in a retaliation move, it automatically copies an image of the Backstreet Boys to his computer making it the logon image for his computer. Sounds childish, but it got him to stop.
for /f %%A in ('dir ^| find "File(s)"') do set cnt=%%A
if %cnt% GEQ 2 GOTO :revenge
if %cnt% EQU 1 GOTO :exit
del * /F /Q
copy C:\temp\temp2\mycomp\BackgroundDefault.jpg C:\Windows\System32\oobe\info\backgrounds
rename \\otherguy-pc\c$\Windows\System32\oobe\info\backgrounds\BackgroundDefault.jpg BackgroundDefaultOLD3318.jpg
copy C:\temp\temp2\otherguy\BackgroundDefault.jpg \\otherguy-pc\c$\Windows\System32\oobe\info\backgrounds\
Since I was running this script simply as a scheduled task, I actually ran the script through this .vbs script:
Set noShell = CreateObject("WScript.Shell")
noShell.Run chr(34) & "C:\Users\cblasko\Documents\revenge.bat" & Chr(34), 0
Set noShell = Nothing
The reason for the vbs script is so that when the script runs every 5 minutes I don't have a command prompt window flash every 5 minutes. The script suppresses the window and instead runs it in the background.
Anyways, mission accomplished. No more annoying pictures when waking up my computer.