Here's the point about storing cover art in the file.
If you want complete files with all the info self contained then it's great. Some programs dont like it as it's slower I believe to read the cover art - I dont think AV2 likes internal cover art too much.
The main reason NOT to store the cover art in the file however is this:
If you want to have a nice high quality copy of the cover art then the file would probably be around 200Kb which is a not bad size. If you have say 15 tracks per album though then this means that you are using 3Mb extra space to save the cover art instead of 0.2Mb.
If you then times this by say 100 albums which is a smallish collection then you are using 300Mb to store the cover art instead of 20Mb which is a BIG difference.
You then get a slightly bigger collection like some of us have - I have 550 Albums roughly.
This would be 1650Mb for my albums which is a LOT.
This could be: 110Mb.
See the difference?
Obviously though this is presuming you use a relatively high quality cover size which I like.
It's mainly a space issue and this especially counts if you have mp3 players etc that you want to transfer the music to - you'd have to remember to remove the images first.
If you leave the art in the same dir as the album then I'd imagine most software could pick it up as MJ now saves 'relative' file paths in the mp3 so all the software should be able to find the covers easily. If you name it right as well, as someone pointed out, XP will also show the cover art as the icon for the folder which is a nice little extra.
Hope this answers your qu thoroughly