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Premiere Elements 12/12.1 on Windows 8.1 64 bit.
Video or Still Background Replacement does not necessarily mean replacement of the whole background. It all depends on how the theme .psd background layer was created. Most of the time the background replacement is a partial one because of the design.
If you want to customize the disc menu in this regard, then you go into the background layer in the Layers Palette of the theme's psd file and edit it. The major psd editor for this purpose would be Photoshop CS or higher. However, if only a background replacement at the.psd level is required, the task might be completed successfully using Photoshop Elements Editor.
Please take a look at one of my blog posts for the how to details for such a task.
ATR Premiere Elements Troubleshooting: PE11: Full Background Replacement Faux Widescreen Disc Menu
Also you may have to do some resizing of the scene selection page thumbnails to get rid of any black borders around them.
Please review and consider and then we can discuss this further if interested and need clarification.
Thank you.
ATR