Ok, well I found out more about the bug,including how to work around it. So I think we can safely say it's not a driver issue. Here are the steps to reproduce the bug and to workaround the issue:
Select "Insert New Object"
Choose "Tiled Background" from the "Insert New Object" dialog
Select a location for the TiledBG
- - the Edit Image dialog is displayed --
I attempt to load an image from an existing file (i.e. click on the folder icon)
Bug : The image is not displayed on in the Edit Image dialog AND if I close the window an empty background frame is displayed in the layout
Workaround : However, if I choose the "pencil" icon and click anywhere on the window the image that I had attempted to load from a file magically displays AND when I close the window it shows in the layout. It's as if the dialog had an issue loading/rendering the image but when the pencil tool was used it was able to render the image AND mark the background as being changed (i.e. set a dirty flag). If I don't click on the screen with the pencil tool enabled the image is not displayed when I close the Edit Image dialog and return to the layout view.