Major progress, so thanks to a cpl devs who helped out (miketaylor, djengizz) i've been able to install the livepaperpicker.apk and the prompt to use live wallpaper shows up now.
but it fc's. reason being is because for some odd reason when it gets deodexed the mainclass in the classes.dex gets deleted and so the activity can't be read and it isn't initialized by dalvik. all we would need is to be re-compile the classes.dex back with the mainclass and in theory it should work.. but that's where the problem lays. smali isn't being so nice and throws bunch of errors.