Brad,
I found a background photo that I want to use. However, when I paste it as the background it appears as many small photos. When I tried to resize the picture it was larger but blurry. I know it's not seamless, but is there a way to enlarge the photo without losing the sharpness. I've attached the original.

Nope, sorry. There is no way to upsize a small photo without losing quality and having it appear blurry. Works exactly the opposite with large photos. If you have a large photo you can easily resize it down and maintain quality. But when you upsize a photo the computer has to do something called interpolation and fill in pixel data. It's simple impossible to keep the photo crisp. If you have to use this background image, your only option would be to track down a larger original.

You might try this. It's a free download.

http://sourceforge.net/projects/imageenlarger/