My experience with this issue indicates that downsampling (not using it) and other "settings oriented" ideas purporting to fix the problem are all only temporary and do not really solve the problem. I have never used downsampling, yet experienced the lost artwork issue.
I think the reason people are posting here claiming they have found a fix is due to the fact that the "fixes" all include an unsync/resync process that rebuilds the library on the phone. Unfortunately, this procedure only results in a temporary fix. Subsequent syncs "break" the artwork on the phone.
I can get my artwork back on my phone anytime. All I need to do is uncheck music sync in itunes, disconnect my phone and restart it, reconnect the phone, and recheck music sync in itunes. Then wait a few hours for my tracks to copy back to my phone and, voila! Artwork restored!
Until the next sync, that is. The same is true when monkeying with the tags and other twiddling: It all concludes with a temporarily-fresh rebuild of the song library on the phone, which is what results in the artwork being magically restored. But then hopes are dashed when subsequent syncing takes place and suddenly random tracks are once again missing their artwork.
This should really be the responsibility of the mega corporation whom we have paid for this platform, but since they are unresponsive, I challenge anyone here to come up with a fix that lasts. I'd really like to see it. But all appearances point to an inherent problem in the syncing process which breaks the artwork on the phone. Has nothing to do with the tracks themselves or other settings. Prove me wrong?