OK, I'll partially answer my own question in case anyone else has this issue. The episode thumbnails are largely in place now. I'm not sure if that's due to me updating iTunes on the Home Sharing host or just letting time go by but either way it happened automatically and now (most but not all) episodes have a preview thumbnail that looks like it's a couple minutes into the show (much like you'd see in finder). The show/movie thumbnails though (cover art) looks like I'm going to have to manually touch everything to obtain. I tried going to "TV Info" and "Movie Info" (formerly "Get Info") in iTunes for some items missing cover art just to confirm it was there (which it was) and those that I did that process for received their art work on Apple TV too. I don't want to do that with every file I have though as I've ripped MANY movies and TV series from my Bluray collection, that will take forever. If you have fewer files though that could be a solution.
As to the unwatched items, I created smart playlists for movies and TV with the criteria in each of "Plays = 0". For movies that's a fairly decent solution but for TV that loses the ability to group by show so you just get a pile of unwatched episodes rather than each show with unwatched episodes from which you could then select one or just resume the series where you left off. I've also noticed the new version of iTunes conversely now only shows the latest (although sometimes it gets it wrong) episode of an unwatched show in the unwatched tab, you can no longer expand that to see all unwatched episodes.
Time to go log some issue reports with Apple...
