There's a Hard way and an easy way:
Easy way: create a new folder in my documents and copy all your current and future photos to it, name it something along the lines of "my photos."
Hard way: you'll have to edit the registry for a complete fix, backup your data first!!!
Create a new folder with nothing in it. Then change the default for My Pictures by using regedit. Go to HKEY_USERS\.DEFAULT\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders, double click on My Pictures and type in the path to the new blank folder.
You will need to create a new shortcut to the actual My Pictures folder.
The My Pictures folder being displayed in the Desktop Tab of Display Properties has been a feature (*cough* FLAW *cough*) of Windows since ME.