iTunes copies the files to the backup and uses unique file names
Windows XP Directory: C: \Documents and Settings\[username]\Application Data\Apple Computer\MobileSync\Backup\
Windows Vista/7 Directory: C:\Users\Username\AppData\Roaming\Apple Computer\MobileSync\Backup
For every device you have, there will be a folder for each that keeps your backup. Just rename the file extensions to .jpg and they'll be the original picture images that you can view on your device. If you have it shown in thumbnails, they should change from the broken/corrupted files to an actual image you can open up.
