1) Open VLC and check whether Wallpaper mode is enabled
Goto Settings->preferences->video->output modules->Directx
Just select the advacned option box and you will get the following window as shown below , enable the wallpaper mode , now when you run your videos and right click on it , you will see a wallpaper option
2) Now to remove VLC from your taskbar go to
Settings->preferences->Interface->Main Interfaces->wxWidgets and uncheck the Taskbar option.
3)Now all we have to do is loop your videos , go to
Settings->preferences->playlists
and you will see the required option .
This will work on most of the versions but i recommend you to use the latest version of VLC .
I tried it on Windows Vista Ultimate but i got a black screen as a wallpaper which was probably due to some issues with Aero
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