From the iPod help pages at Apple.com
Viewing album artwork on iPod photo
Did you know that iPod photo can display the album artwork for the song
that's playing?
To enjoy this feature, just make sure the "Display album artwork on your
iPod" preference is selected in iTunes before you update your iPod photo.
1. Select your iPod photo in iTunes.
2. From the iTunes menu, choose Preferences (Windows: From the Edit
menu, choose Preferences).
3. Click the iPod icon to select the iPod preference pane.
4. Select the "Display album artwork on your iPod" checkbox.
5. Click OK to close the Preferences.
Yep.. Did that .... No luck.
Nothing so dramatic-- I had the same problem and it's easy to fix. Plug
in the iPod, and then un-check the button marked "display album artwork
on your ipod" (under the "music" tab) and click "Apply". Then re-check
the button and click "Apply" again.
The last step may take a while, depending on how much album art you
have, but once it's done the album art will be updated on the iPod.
--
Tom "Tom" Harrington
MondoMouse makes your mouse mightier
See http://www.atomicbird.com/mondomouse/