Oh, okay, now I understand what you mean.
Personally I use the folder.jpg approach exclusively as it works virtually everywhere - on each PC OS, under Rockbox and even when using the OF. Perhaps the file attributes of your folder.jpgs include the hidden flag, it think that's set by default if you let Windows generate these files. I use MP3Tag to download covers and they're automatically renamed to "folder.jpg", but without the hidden attribute.
Bands I dig: Genesis, Jethro Tull, Marillion, Pink Floyd, Mike Oldfield, Arena, Savatage, Threshold, Twelfth Night, Flower Kings, Magenta, Mostly Autumn, Transatalantic, Vanden Plas, Deep Purple, Metallica, R.E.M., Cake, and, yes, Katie Melua.