It should pick up the folder.jpg file, but it all depends where you have chosen to store your cover art (next to media or in a separate folder). Options - File Location - Cover Art.
Whoops, sorry I am slow to reply: thought I was subscribed to this topic but I guess not.
That is how I have it set up, in the same folder as the files, but not as folder.jpg. Will I have better luck if I switch it to that? I don't want to have to try and rename all my cover.jpg to folder.jpg, but, if I must, I can batch it.
Thanks!
Micah