Make sure that albumart.jpg is readable by the mt-daapd “runas” user. Then, you can try running it with the -d9 argument. You might want to specify a logfile in the config, too. Once you have that, run it and and connect to a song that should have cover art.
Then check to log and see where it’s trying to open the cover art file. See if anything obvious pops out at you. If not, then gzip up the log file and mail it to me at ron at pedde.com, and I’ll see what I can make of it.