It's not that scaling is broken, it's that the new parallax feature requires a minimum amount of zoom to work, so that there is plenty of off-screen image for the effect. It's possible to zoom into your photo more than the default, but you can't zoom out to make more of the picture visible. Attempt to do so and it springs back to the default.
This, of course, makes it difficult to judge how well a wallpaper will look before we try it. We are used to judging the entire image, not just the center of it.
Do not expect a fix, unless Apple decides to give back a non-parrallax option for wallpaper. The current option of reducing motion stops the parallax effect, but does not change the way the wallpaper is resized to work with the feature.
I've had some success by using an image editing app to paste original images inside a 2448 x 2448 image, and adding some borders. I've also seen the size 2526 x 2526 suggested. The square aspect is best, since it tends to transition best when the iPad goes from portrait to landscape views.
While no expert, I'd be happy to explain the few things I've tried, and the app(s) used; though I expect the apps Johanna mentioned would be far easier, they may not offer as much flexibility. Depending on how badly you want a specific wallpaper to work, it might be worth the effort.
