After fixing the shower head I now found that my shower is spraying water inside the wall. Any ideas on how to fix this problem would be GREATLY appreciated

You may need to unscrew the pipe from the wall, wrap teflon tape around the threads and screw in tight, then teflon tape on the other end and then shower head.

As Stramando says, remove the shower head and shower arm install it as follows.

Wrap about five layers of Teflon plumber's tape in a clockwise direction around the male threaded end of the shower arm to be secured to the pipe in the wall. Pull the tape tightly to prevent leaks. You can also use a pipe compound instead of the plumber's tape,Screw the end of the shower arm directly onto the elbow of the pipe inside the shower wall by turning it clockwise. It should take about two turns.
Wrap several layers of Teflon tape around the threads on the opposite end of the shower arm before screwing the shower head back on. Turn the shower head clockwise about one half turn with a wrench. If it leaks turn it another turn or two to tighten, good luck.

John

Good advices above... I would like to add: once the pipe is unscrewed and in your hand, take a flashlight and use it to inspect the Drop 90 fitting. It may be broken where it solders onto copper pipe. If you have galvanized pipe than you should be OK.