Background image in Blender 2.54

I have been trying to load a background image in blender 2.54 and have not been successful.

I have followed the following tutorial

but it still doesn’t work, it works if I upload a blender 2.49 file. But doesn’t let me upload it directly in 2.54.

Appreciate the help.
Note that you need to be in orthographic view for the background image to show. Toggle between orthographic and perspective view with numpad 5

A side note - there is some memory leak as the memory usage increases while going through frames on 2.49b the refresh button helped but in 2.54 hadn’t found it.