account12, I noticed this exact same behavior. I also use iTunes Match and have meticulously updated all the metadata and embedded artwork. All of my curated music has been in iTunes Match for a while and was working well so I removed local files on my Mac to free up space (I have a back up on my NAS).
Now with the Catalina update, all re-downloaded music is missing the embedded artwork. The Music App does show the artwork in the Get Info tab but you cannot see it in Finder. I also used AtomicParsley (a metadata command line utility) to extract the artwork from the file and it is indeed missing.
I noticed that if you have the files locally, and update the album artwork, it does properly embed the artwork in the file. But the initial download or any artwork edited without a local file will not include embedded artwork in subsequent downloads. That is a MAJOR problem for those of us that took months to get our large music collection curated and keep it in iTunes Match. That prevents that artwork from being available to other apps like Plex.
I spoke with several people on Apple Support and they say this is by design in the new Music App. I suggested that they "fix" this design and they asked me to submit a request on https://www.apple.com/feedback/. I would highly encourage anyone who spent a long time adding custom album artwork to use this link to request that Apple add a way to embed the album artwork into the file upon download.
Also, I saw a user report that they could not copy the album artwork from iTunes and another user reported they could drag and drop the artwork. What I have found is that you can only copy or drag the artwork if the artwork is embedded in the file. The majority of the songs that I have are in the cloud only and I cannot drag that artwork. Even if I download a file from the cloud, I cannot drag the artwork (because it doesn't have it embedded). But if I override the artwork shown in the Music app, then it is embedded and then I can copy it from the Get Info tab. I also submitted a feedback request to allow us to copy the album artwork from non-downloaded files. I encourage everyone else to submit the same feedback as well. The more requests they get, the higher they will prioritize it.
Here's hoping they fix it soon! You can see in the 10.15.1 release notes there is no mention of this: https://developer.apple.com/documentation/macos_release_notes/macos_catalina_10_15_release_notes.