iPod Movie artwork problem

I have a movie I encoded myself (AVI) but when I try and set the artwork for it in iTunes, it just displays a white box. I can drag and drop the artwork fine and it appears in the preview but as soon as I click ok it reverts back to a white box. To try again I then have to 'delete' the box from the artwork preview pane and place the image i want but again it still reverts to a white box on completion.

Any ideas?

Its the latest iTunes. PPC.