QUESTION: Will my Library Back Up contain the image files for the album covers?
No, not unless they are stored within the files, you will need to backup your coverart folder manually and then copy it to the new machine. If it's the same path as the old machine, then once you restore the library/settings it should be found by MC, or of course you can restore the library/settings and then set a different path in the MC options if you want to loacte it in a different place this time.
You may also want to manually backup your thumbnails, (search the forum for "backup thumbnails") but it may be easier/better to just get MC to rebuild them once you have got everything restored and working. You do this under Tools/Options/Tree & View then click ..Build missing thumbnails, this of course could take a while depending on how many there are to build, but it does run in the background.
QUESTION
At the present time when I take an advance peek in the Action Window and click on the Build Playlist tab I don't see any options to toggle it on/off. Following my MC reinstall/startup is it going to look different? Will there be some obvious Cancel option?
When MC starts up for the first time, there will be a box at the bottom of the action panel counting down to start the auto import with an option to cancel, you can't miss it if you actually look for it, just it's easy to forget to look in the excitement of getting MC running again
At the end of the day, if you have a full backup of your old machine plus the MC library backup then you should be able to get MC back to the same state on the new machine.
Hope this helps a bit.
Richard