If I switch from Desktop to Folder view my desktop image changes. Why?
The background image is tied to an activity, the background image changing when the activity changes is an expected behavior.
If I switch and allow separate activities on each desktop, the desktop image changes. Why?
Because the desktop image is tied to an activity, if you change to another activity, the desktop image will change too.
I can't seem to have both desktop activity for one desktop and folder view activity for another. Why?
Probably because you set your desktop to have that behavior.
Each activity manages its own background image.
You can set your desktop for each desktop to have its own activity and you will have to manually set the same background on all activities if you want them all to have the same background or you can set your desktop to only have one activity that shows up on all desktops and you will only need to set your desktop image once but you can not have a desktop activity on one desktop and a folder view activity on the other.
I do not understand the need to have both a desktop activity and a folder view activity. What purpose does this serve? Why not simply have different desktop activities? That seems to accomplish having one set up for media, one set up for work, one set up for games, etc.
The original plan for kde4 was to have desktop activity only but a lot of people complained because they wanted the "traditional desktop". Folder view activity gives the traditional desktop to the traditional folks while desktop activity does given the "default" kde4 desktop experience.