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Not sure what you're doing wrong, but whether I drag files onto removable media or use iTunes to sync them, album artwork and all other metadata stay attached to the files.
 
Yea, I only have had to add artwork manually to Audiobooks and a few CD's... but that is my iTunes library, the artwork remains with the media when I transfer it to my iPhone. I am not entirely sure what is causing that.
 
something to do with coverting bit rate to save space. if i convert it first then drag that to my iphone it works, if i let the sync do it, then no
 
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