ITunes :: Album Art Won't Transfer When Dragging Music To Device

I recently updated iTunes to v10.6 from 10.0. Since then, any album art that I have manually added in the past no longer shows up on my iPhone or iPod Classic. However, album art that was retrieved via iTunes (purchases, etc) does appear. I first noticed this on my iPhone, which was running iOS 5.0.1 at the time. I updated to iOS 5.1 afterwards, thinking that it might solve the problem but nothing changed.   

Some things I should mention; my entire library is ALAC (lossless), and I do not use the sync feature with music. I manually drag albums over that I want and use the "convert to AAC feature", and have always done so. The main reason I upgraded to iTunes 10.6 was to take advantage of converting to AAC 256kbps instead of the previously fixed bit rate of 128kbps. Anyway, I dragged over a lossless album without the option of converting to AAC, but it still didn't transfer the artwork.  
In case anyone is wondering, the method I used to download my art was by finding the cover using Google Images, hilighting every track in the album, and pasting it in. Again, I never had this problem until upgrading iTunes to v10.6.