Try turning on Reduce Motion in Accessibility settings under General (basically to turn off parallax) before you do that to see if that allows you to resize.
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Nope does not work. It seems to be a problem that others are experiencing also. When you go to set an image as a wallpaper it zooms in way to much. When you go to pinch to resize the image, it does not let you do it. Oddly on beta 3 that problem wasn't there, but it would crash when you try to do it. Now it does not crash, but it gives you fits when setting certain images as your wallpaper now.