vesamenu.c32 can dislplay a picture in the background (see the Parted Magic part of UBCD50).
menu.c32 can't display a picture.
Anyways, I copied the whole cd to my usb drive, and instead of using menu.c32,( this wouldn't work for me either, I think this may be because I was already using vesamenu.c32 to load the options for the other tools on my usb) I used vesamenu.c32.
It should work wit menu.c32 also. Do you have the last version of all the syslinux files (syslinux, menu.c32, menuvesa.c32 memdisk,...)?
See my post for the problem which existed it one of the first betas of ubcd and wich is solved now.