Setting background image to dropbox file doesn't update background
You're right, it is cached. So if you want to change the desktop image, you'll need to change the db file. In Yosemite, that is ~/Library/Application\ Support/Dock/desktoppicture.db

And here's a way to change it using the Terminal:

sqlite3 ~/Library/Application\ Support/Dock/desktoppicture.db "update data set value = '/path/to/your/image.jpg'" &amp;&amp; killall Dock


So, if you want to run that after a file have changed (such as modyfing it through dropbox) you could use a file watcher script, such as this Ruby one.