Bump...
I did some more reading and searching and learned that the default file name for album art is %album%.jpg - I'm sure I tried that before I began this thread and I have tried it again now without success.
I would be grateful if somebody could clarify this... Does Winamp have album art support for portable devices or not? It appears to me that it doesn't.
If I get nowhere then I guess I'll embed the art in all my files. I prefer to keep using Winamp even if it doesn't actually support album art for portable devices that aren't iPods.