Unable to set image on lock screen through GPO

Provided that the file exists on the computers, the settings seems to be correct.

So, I think that you are not using Windows 10 Enterprise or Education? As stated in the Help text, you can only use this policy on Windows 10 Enterprise or Education, or Windows Server.

If your company uses Windows 10 Pro for example, this will not work.

However, if you are already using Win 10 Enterprise, then this may be another issue: try to manually edit the picture and save it again because Windows uses the last modified date/time of the file to detect if it should read the lock screen picture again