New updates are being added at the bottom of this story…….
Original story (published on November 12, 2021) follows:
macOS 12 Monterey, the latest version of Apple’s operating system for Macs, is having some problems while trying to set up a screen saver.
Many users are reporting that, after upgrading to macOS 12 Monterey, they can no longer choose a photo to set as a screen saver. In addition, the issue would also affect the dynamic desktop wallpapers.
Set screen saver from Photos not working on macOS 12 Monterey
According to reports, a bug in the latest macOS 12 Monterey does not allow users to set whatever image they want as a screen saver (1, 2, 3, 4, 5).
After upgrade to Monterey, Screen Saver won’t load photos like before in Big Sur
I have tried the solutions as presented in similar posts, but I still can’t get my screen saver to load my photos. I even tried stock folders on my hard drive, but again, no load. They show up in the selector in System Preferences, but when I go to Preview the screen saver (or initiate it from the hot corner), it shows “Retrieving Photos (0 of 4)” for one of the folders (has more than 4 photos), and with others, doesn’t report anything.
This all used to work just fine under Big Sur, but after Monterey, no joy. Any help appreciated!
Source
Apparently, when trying to set an image (not stock) as a screensaver, users only reportedly get a black screen with a watch. In some cases, When selecting a folder of photos, the images don’t render.
It should be noted that the problem would only be affecting non-stock photos. If you try to choose a predefined screen saver, it can be set without problems.

Also, the problem is reportedly occurring on iMac, but not on MacBook:

A potential workaround
A user reports having discovered a workaround that could help mitigate the situation, while waiting for an official fix from Apple:
I was having the same issue. For whatever reason the screensaver file is in the directory at “/System/Library/Screen Savers” but when I clicked to install it, no change. Copied the file to the desktop, changed the name, opened it, and it showed up in the Preference Pane.
Source
The bug was present in macOS 12 Beta
It should be noted that the same problem had already been reported since the macOS 12 Monterey betas. However, it seems that the ‘stable’ version of the system kept it (1, 2, 3).

Dynamic desktop wallpapers affected too
The dynamic desktop wallpapers would also be causing problems in macOS 12 Monterey. In this case, users report that setting a dynamic desktop wallpapers always reverts to the default Monterey wallpaper:

At the moment, there is no official statement from Apple on the matter. Therefore, it is not yet known if they are aware.
In the coming days, if there is any new development in this regard, we will update this article. So, stay tuned with us. You can also check our issue/bug tracker dedicated to macOS 12 Monterey.
Update 01 (December 01)
IST 1:10 pm: One of our readers tells us they’ve been in touch with Apple on this matter and according to the company, this is being looked into. As such, it is alleged that a fix will come with the next OS update.

Many thanks to one Helen Bentley for the tip.
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