I've uploaded it again, an double checked the path and it's still not working. I have no idea what I've done wrong.

What I've done:
1. Clicked on File Manager in CPanel --> Web Root (public_html/www)
2. Click on public_html --> wordpress content --> themes --> atahualpa --> images
3. Then I upload my jpeg background and I can see it in the folder titled ChevronLtGrey.jpg (I typed jpeg in my first post, but correctly entered jpg in the design page)
** This post is continued in the next reply (the system isn't letting me post my entire message)