No, gwstudios is entirely correct. He was referring to the system page.

Most of us would normally use a single background for the entire configuration. This background is placed on the system page and "send to back" is set to ensure that it is behind the top and bottom graphics. The backgrounds in the gallery are 640 x 480 for this reason.

The only time you need smaller backrgounds (such as 640 x 400) is when you want to put a different background on another page.