OK, I've been fighting this too...amazing how such a small thing can cause so much frustration...(never mind past the beta testers and permitted into general release).
I've found a work-around for myself and thought I'd share (it's a combination of some previously mentioned steps):
1) On my iPad 2, I went to Settings -> Music -> Group by Album Artist and I set it to OFF
I think it's worth mentioning that, when a song is 'tagged' there is both an "Artist" and "Album Artist" field
and this can be confusing, so by turning "Group by Album Artist" OFF, I think we can focus now on just
the "Artist" field used for tagging.
2) Generally I used MediaMonkey to tag/manage my songs. Regardless of what you use, I've found (and this was mentioned earlier) that the artwork used by the iPad Music player seems to be closely-related to the artwork assigned to the 1st Track of an Album [at least this seems to be the case when sorting by Album].
That said, use whatever method you want (Media Monkey, iTunes, etc) and ensure ALL tracks have artwork associated with them. I've found that if artwork is assigned to track 5 only (for example) it will look good in some parts of the iPad player but missing from the Albums directory. Ensure all the tracks have Artwork!
* Media Monkey has a nice 'apply artwork to all selected tracks' option that can help you out.
3) Sync and Check your Progress
4) Finally, I found that even though MediaMonkey did it's job. iTunes would sometimes still not recognize the artwork. This was apparent in iTunes as I selected the track and the artwork box was still empty.
When this happend, I pasted new artwork to the first track, directly in iTunes and sync'd again.
This solved the problem for me.
* Note, I keep my media tags pretty tidy.... if you still have problems with your Albums sorting into 'Other' categories... check the 'Artist' and 'Album' tags using the "Get Info" option [change as needed].
This can be a lot of work....but try a couple and see if it's worth if for you.