What is the size of the album art? I found this in one of the KB articles
http://kb.sandisk.com/app/answers/detail/a_id/221/kw/clip%20sport%20album%20art
Note: The SanDisk Clip Sport album art maximum supported resolution is 480 x 480 with a maximum file size of 450kb
If you album art is within that spec and still not working can you post a sample file?