Try using the flac commandline "metaflac" to verify if there is an image file inside the flac. That way you can at least determine whether the file actually has the image or not. I use the front cover art location (3).
Also, what kind of image are you using? The flac decoder plugin only supports jpg, png, and gif. Valid file extensions are "jpeg", "jpg", "gif", and "png". Upper case and/or mixed case is fine.
So, I finally got time to work on this issue and used the metaflac utility as you suggested. When I examine the block 3, I get
METADATA block #3
type: 6 (PICTURE)
is last: false
length: 397806
type: 3 (Cover (front))
MIME type: image/jpeg
description:
width: 1456
height: 1416
depth: 24
colors: 0 (unindexed)
data length: 397764
data:
00000000: FF D8 FF E0 00 10 4A 46 49 46 00 01 01 00 00 01 ÿØÿà..JFIF......
00000010: 00 01 00 00 FF FE 00 2E 49 6E 74 65 6C 28 52 29 ....ÿþ..Intel(R)
00000020: 20 4A 50 45 47 20 4C 69 62 72 61 72 79 2C 20 76 JPEG Library, v
00000030: 65 72 73 69 6F 6E 20 5B 31 2E 35 31 2E 31 33 2E ersion [1.51.13.
00000040: 34 35 5D 00 FF DB 00 43 00 03 02 02 03 02 02 03 45].ÿÛ.C........
This seems to indicate that the image is indeed embedded in the FLAC file but MC12's "Image File" tag still shows the name of the actual file on the disk rather than "Inside File". I tried clearing the cover art associated with the file and then reassigning it from the file and then doing update tags (from library). Still MC12's "Image File" is pointing to the file on the disk.
thanks,
Osho