Here's a strange bug with the iPod photo and iTunes 4.7 that I encountered this past week of iPodding, and which I had found no mention of online.

After I added the first 5 albums to the pod, I unplugged it, checked out the songs and saw the nifty cover art displayed with my songs. I really liked that feature.

I then added a few hundred more albums and went back to the iPod to listen to them. At this point I noticed that some tracks which did have art displayed in iTunes, were not displaying any album art during playback on the pod. I then loaded up some of the first few albums I had put on it, and some were now missing their artwork.
This confused the hell out of me and I spent the past 6 days trying to figure out how to get my artwork back.

I'll spare everyone the gory details of everything I tried in order to get back my art, but suffice it to say that there was plenty of hair pulling involved.

Here is the fix:
Go to your "iPod Options" in iTunes, turn off "Display Album Art", hit "Ok". Repeat those steps to re-enable the Album Art.

Once you disable/re-enable the Display Album Art option, iPod will rebuild the ArtworkDB and corresponding Thumbnails database.

After the data files are rebuilt, all your art is once again gloriously displayed on the iPod.