This looks like a very common problem in case of Android phones, after using the same images again and again as your wallpaper, it happens that when you want to select a particular image as wallpaper, it fails to load the image, and displays a message saying ‘Failed to open Image’. However as far as simply viewing the image part is concerned, you don’t face any issues there.
I too was facing this issue on my phone recently; here is the way to resolve this issue. This happens due to the .thumbnails folder inside the DCIM folder on your memory card.
I didn’t get the reason behind it, but as far as resolving the issue is concerned, you can simply delete the .thumbnails folder, and the issue will be resolved. In order to delete this folder, you can either use a file explorer application, or simply connect your phone to the PC and access the memory card to delete the folder.
Another method which somebody suggested me was, rename the wallpapers, the issues is resolved by this, though I couldn’t try this, but it seems that this too will work, reason being renaming too will start a fresh thumbnail generation, which ultimately is as good as deleting the thumbnail folder to generate the new thumbnails.