Since an iTunes upgrade in May 2011, iTunes converts jpg to png if the artwork is added to multiple tracks using the get info window. Artwork added to individual tracks in the get info window, or artwork added to multiple tracks in the artwork box on the browser (the lower left corner where it says "Drag Artwork Here" if there is no artwork).
Now, to add jpg artwork to multiple tracks, the artwork has to be added via the artwork box on the browser. If there is existing artwork, this must be deleted first or the new artwork will not replace it bet will be added as a second file (this can be seen on individual track in the get info window).
The problem with conversion to png format is that the size is increased (doubled or more).
There are two problems with adding to the artwork box for multiple tracks. First is the issue that previous artwork must be deleted since adding to the artwork box does not replace existing artwork. Second is an issue which occurs if you are also playing tracks while adding artwork. This is due to another problem with iTunes; that the artwork box changes automatically from "Selected Item" to "Now Playing". If it is set to "Now Playing", the artwork is added to that track, and not the selected tracks. Also, it takes a short time to add the artwork, and if iTunes switches to the next track in the middle, it stops adding artwork to the selected tracks..
So, to add jpg artwork to iTunes, you need to do the following:
1. Delete existing artwork from the tracks.
2. Make sure the artwork box title is "Selected Item" and not "Now Playing"
3. Drag new artwork to the artwork box
4. Make sure the artwork box does not switch to "Now Playing" while artwork is being updated.
I recommend not playing tracks while adding artwork, to avoid problems with either updating the wrong tracks or not completely updating the selected tracks.
And I wish iTunes was changed back to the way it was. Using the get info window did not have these issues.
Yes I have no idea why they decided we all would prefer bloated music files and the need to have our cover art as png files. The fact that you can still add them as jpgs albeit in a highly exasperated way shows a rouge element in Apple's software design and test strategy, they are not the wonderfully coherent and precisely formed processes they used to be. The problem with the switch to PNG is even more painfully obvious if like me you tend to source high resolution images for your cover art which PNG does not compress well at all.