I am not aware that there has ever been an option in iTunes to stop the artwork being added to a device during Sync. The only method would be to remove the artwork from the song.
Regarding the lyrics, I'm not aware how many songs ever have the lyrics embedded in them by default. It's certainly not the case with music purchased from somewhere like Amazon. The only songs that I have with lyrics are when I've added them myself.
But more to the point, the artwork for any song is probably only about 100KB, whereas a three minute song with a Bit Rate of 128Kbps is roughly 2,700KB. But the iTunes store now sells music with a Bit Rate of 256KB (and Amazon is higher still) and a three minute song in my library (at 256Kbps) is 6,675KB. In other words, the artwork takes up a very small amount of space compared to the music itself and if getting rid of it actually saved a measurable amount of space you would have to get rid of the artwork from 67 songs just to be able to add one song (at the lower Bit Rate that neither Amazon or iTunes use).
My next test might not stand up to precise scientific scrutiny, but I added the lyrics from a song in my library to a document and it caused the size of the document to increase by just 4KB. So I'm not convinced that removing either artwork or lyrics will help you with your storage issue (but there is something you can do*).
The Sync Music only option that you mention refers to not synchronising videos or voice memos. Plus, there are separate options for synchronising Podcasts, pictures and Audiobooks. It is not, and has never to my knowledge been, about not putting artwork or lyrics on a device.
So what can you do?
* Here is a suggestion (you do not have to do it):
Think of all your music and separate it into two or three types:
- music that you want on your phone all the time
- music that you only want to listen to once in a while
- music that you want to hear only at a particular time of the year (Christmas songs for example)
It's possible (and easy) to create Smart Playlists and use them to automatically add and remove songs from the phone every time you Sync it with your iTunes Library. Let's consider the music in the second group above; music that once you've listened to it you don't want to hear again for (let's say) six months.
Create a Smart Playlist that excludes songs that have been played within the last 180 days (six months). At each Sync the songs in that list that have been played are removed from your phone, leaving space for other songs that have now not been played for the six months we've set up. Each time you Sync, the Playlist is refreshed and some songs are removed and others put back. This way we can manage a large music library on a device that can't take it all.
It's how I manage my iPod Touch, which simply doesn't have the capacity for all my music.
If the idea interests you, you can create and test the playlist in your library and once you get it working in a way that suits you, add it to the phone. You do not have to play any of those songs by using the Playlist. You can play them as you would normally: by album , by artist, or genre. The Playlist is simply the method to control the songs being added or removed.
If you require assistance in setting up this Playlist, please ask.
Oh, and by the way, there is an option in iTunes to convert higher rate songs (the 256Kbps and above) to 128Kbps when they are added to your phone. In other words, a reduced quality version of the song is put on the phone, reducing the amount of space taken up and thereby allowing more music to be put on the phone, while leaving the higher Bit Rate version in your iTunes Library.
Notice that I have not suggested that you try this particular option.