There are two separate things going on here — the missing "Sync Library" option and the incorrect artwork. Here's how to address both:
Why "Sync Library" isn't showing:
On iOS 26, "Sync Library" (formerly called "iCloud Music Library") only appears if you have an active Apple Music subscription or iTunes Match. If you don't have either of those, the option won't be visible. Since you're syncing via MacBook (Finder/USB sync), you're using a different method — that's fine.
Fixing the incorrect artwork when syncing via MacBook:
1. Fix the artwork on the MacBook first — In the Music app on your Mac, select all songs (cmd+A), right-click > Get Info > Artwork tab. Make sure artwork is correctly embedded. Sometimes artwork is stored as a file link rather than embedded in the song file, which causes it to not transfer properly.
2. Clear the artwork cache on iPhone — Go to Settings > General > iPhone Storage > Music > tap "Edit" and delete all music. Then re-sync via Finder on your Mac.
3. In Finder sync settings — Connect your iPhone to your Mac, open Finder, select your iPhone, go to the Music tab, and make sure "Sync Music onto [iPhone]" is checked. Uncheck it, click Apply (this removes music), then re-check it and sync again. This forces a full fresh sync including artwork.
4. Embed artwork into files on Mac — In Music app on Mac, select songs with wrong artwork, right-click > Get Info > Artwork, drag and drop the correct artwork image in, click OK. Then re-sync to iPhone.
5. If artwork is still wrong after syncing — The artwork in your Mac's Music library may be cached incorrectly. Quit Music on Mac, go to ~/Music/Music/Media/Music, find the affected albums, and check if artwork files (.jpg) are present alongside the audio files.