Actually, it's much simpler. You're code was ok, but you forgot an EndIf:
 Code:
;=============================================================================================
; remove picture icon on Windows 7 login only if BackgroundDefault.jpg picture actually exists
;=============================================================================================

If exist ("%windir%\system32\oobe\Info\Backgrounds\BackgroundDefault.jpg") = 0
  ? "do not change the Windows 7 Login Look"
Else
  If exist ("%windir%\system32\authuiobsolete.dll") = 0
    shell 'takeown /a /f %SystemRoot%\System32\authui.dll'
    shell 'ICACLS %SystemRoot%\System32\authui.dll /Grant Administrators:F'
    ? "removing the Picture Icon on windows 7 login screen"
    move ("%windir%\system32\authui.dll") ("%windir%\system32\authuiobsolete.dll")
    copy ("\\" + $MyDomain + "\netlogon\patches\authui.dll") ("%windir%\system32\authui.dll")
  EndIf
EndIf ;<--- There's the puppy

Apart from that error, Shane's and Glenn's comments apply.
Funny how Shane fixed it but didn't mention it ;\)