I have this same issue - low resolution audio files that look a pig on my mac.
I had previously been managing my audiobooks and their artwork just fine until I upgraded to iTunes 12.5.
The way I used to do it:
command 'i', artwork tab, add artwork, select a higher resolution file downloaded (from the internet from a designated folder that stays in the same place and backed up), select that file, click ok. Job done.
The update has reverted all my audiobooks to low resolution files, which not only looks a pig in iTunes, but also stops me from recognising what audio file is which and now i can't go back in and undo what the update had done. It's infuriating.
What it's like now after the update:
If try to repeat this logical and simple process to my audio files, iTunes does not remember to complete my simple instructions to manually change my audio art work files. iTunes now has amnesia and simply reverts back to the pig art work audible supplies. All the artwork for my iTunes music files seem to be in tact, even in cases where I edited the artwork of those files (because my music library includes rare music files that came from physical album copies that iTunes does not have the artwork for). So the issue appears to be artwork associated solely with audio files. So then, my extended question to this quandary is this: Have the clever iTunes coders intentionally sabotaged the way audio files appear in iTunes because they want audio listeners to swap over to apple audio? Because they know audio listeners are a fickle and picky bunch and nothing grinds the bookish more than ugly pixelated artwork or a bent crumpled book jacket - shrewd and clever iTunes, shame on you. Sure, Its a clever ruse that the same mentality that operates in the IKEA packing department also operates in an iTunes lab; omitting necessary tools to complete a simple task, leaving your customers blind with rage and anxiety about something that doesn't really matter - you clever, annoying little geniuses iTunes (and IKEA).
Please help me whip my audio files back into their former pretty glory and rid them of this pixelated menace.