Lockscreen Wallpaper Designer (currently on sale for US$0.99) is a clever little app that lets you make an attractive lock screen for your iOS device that keeps the date and time legible.
To use the app, grant it access to your photo library. Choose an image, and select a rounded, square or star shaped window. You can zoom, shrink or reposition the photo as you like. Finally, save it and then find the result in your camera roll. Save it as wallpaper and you're good to go.