I'd suggest saving them as Album.jpg in the song's folder by default, but have it configurable of course. That way WinXP uses it for the thumbnails, which just looks cool in explorer thumbnail view

(Usually in organized collections, the songs are stored as Artist/Album/songs.ext, at least at all the ones I've seen)
I think a dockable window would work well, and also to have another view with all the album art with the artist/album title are listed and can be grouped by artist/year/etc.
Another possibility is to be able to associate file(s) with certain cover art via the properties/tagger. Storing the image in the song seems kinda unnecessary to me.