First step is to switch X11 to TrueColor. By default, Irix disable it. So edit your /usr/lib/X11/xdm/Xservers and add these flags:

-class TrueColor -depth 24

Here is a script, courtesy of Nekonoko from feu Nekochan. On IRIX 6.5.22+ you can also put jpg and png in your $BGDIR.
Rerun it when you add new pictures to your directory.

#!/bin/sh
BGDIR=$HOME/Backgrounds
cp /usr/lib/X11/system.backgrounds $HOME/.backgrounds
chmod 644 .backgrounds
cd ${BGDIR}
for x in *.jpg *.xpm *.png *.bmp; do
case ${x} in
'*.jpg'|'*.xpm'|'*.png'|'*.bmp') ;;
*)
NAME=`echo ${x} | tr '.' ' ' | awk '{print $1}' | tr '_' ' '`
echo "" >> $HOME/.backgrounds
echo "background \""${NAME}"\"" >> $HOME/.backgrounds
echo "default \""-image ${BGDIR}/${x}"\"" >> $HOME/.backgrounds
;;
esac
done

Now the background settings menu will suggest you your new pictures :).