Check that the Handheld Options for the sync 'device' aren't interfering with the images. There's a checkbox for "Enable album artwork support if possible" and a drop-down for "Cover Art:Add to Tags" There's also an Image conversion option.
Then use the file explorer to go look into the folders to make sure there's a folder.jpg being created.
That and does your car radio have internet connectivity? If so, might it be attempting to get track info metadata online? I know my Porsche can do this but I've not checked to see whether it 'works properly' or not, as I don't really care that much about the album art for this stuff.
I prefer to avoid putting more on the microSD cards than necessary as there are limits on just how fast the car radio will process very large numbers of tracks. I care about access to the sounds, not the pictures, thus I tend to strip the tracks down to the bare essentials.