Workaround
I had the same problem, I think it's an iTunes 9.2 issue with artwork, and there are many.
The way I 'fixed' it was once I added the artwork through the same method you described, with the song/album still highlighted, I opened the 'item artwork and video viewer', which is the little up arrow next to the shuffle/repeat buttons. This seems to force iTunes to create the thumbnail image for that album once it pops up.
This seems related to my problem. iTunes 9.2 now only displays reduced quality thumbnail versions of all your artwork. While this makes browsing in grid view much faster for most people, it bugs the hell out of me since I like to add in high resolution scanned artwork and now I might have well as taken it from Amazon. The high quality version is still embedded inside the file, I just can't get iTunes to use it anymore.