This started to happen after I messed with the location settings for the thumbnails. As far as I can tell I've pointed it back to the original folder but it hasn't stopped the problem.
Which location setting exactly?
Thumbnails in MC are not the same as externally saved cover art. MC can create a thumbnail from the video content or from an externally linked image file (for instance, from a saved screen grab). The actual thumbnail cache that contains all thumbnails is stored in the application data location (one cache for each library).
The path to external "cover art" is stored in the "Image File" library field. For checking the Image File field values you can create a list view for your video files and add that field as a column or alternatively set Action Window > Tag to show that field (but then you can check only one file at a time)
I think the current implementation may clear the field value if the path is incorrect when MC tries to access the external image file.
Assuming you still have the grabbed image files on the hard drive, you may need to recreate the links manually by using the Cover Art > Add From File... feature.