As you stated, you changed the cover art file to folder.jpg and the cover art should be displayed correctly on your iPad. I do not understand why this does not work. I did the same test and it work fine. Sorry, I have to ask. Since you have over 1,000 albums, you need to search for the two test albums you changed.
Please confirm the album cover art jpg file is included with your album data and the file is named folder.jpg. If it still fails to appear, please ask Aurender. Please let me know know.