Artwork seems to cut/paste in my situation, but does not "attach" to the file so the icons appear as generic in a list view or when viewing the file using "get info". Also noticed that cut and paste does not work for text in the comments window either, especially if the copied text contains style changes (underlines, etc.) or hyperlinks.
Also, if importing AIFF files into iTunes, the song that plays upon import (usually the highest numbered track) will not accept artwork no matter what, unless you convert to another file type (like AAC). The only workaround is to make a copy of the last song, rename it with a higher track number, then import both at the same time. Then just delete the higher numbered track. This has been an on again/off again problem for at least the last 3-4 versions of iTunes.
MacBook Pro/OS X 10.6.8/iTunes 10.4(80)