The neighborhood picture must be saved as .png file not a .jpg. Also, sometimes (not always) it may be the size is too small or too large. I have seen where I had to edit size down to 300x225 but other times I could use 600x etc. I'm pretty sure the size matters, and Maxis recommended 300x225. Should look like this depending on your hood number. Example: N007_Neighborhood but a .png file. You can edit it in Paint and save as .png. (Make sure you save as into the particular hood you need to make the picture for)
