I was having the same problem when playing music from an SD Card. I found out that the default pic size for most of iTunes album artwork was 600x600 and the max pic size the unit will display as album artwork is 500x500. Once I fixed this on the files, they all display fine now. I used a program called MP3Tag on a PC to change the artwork. To be safe, I only used this program on the files on the SD Card so it would not affect anything in iTunes.
I know you said that you were using files off of the USB drive but the problem might be the same.