If you have the images to insert You can use TagScanner5.1 to imbed the jpg
into mp3 or m4a files.
But you'll have to copy them off of the ipod to do it or the process will be impossibly slow.
I also HATE iTunes because of apple's typically sloppy orgainzation.
It seems that Apple cannot pay attention to the "Album Artist" (not to be confused with "artist") field in the id3 tag specification, nor can they be bothered to actually imbed the image in the files themselves
(like an extra 30k-70k makes a significant difference in a 5meg-10meg file)
Live albums and "compilation" albums are dumped not into the folder for the specific artist but into a catch-all folder for "compilations"