the picture displayed is the one ticked as primary picture in the tag editor, which by default is the first picture linked to the music file (you can manually tick other linked pictures)
If you initially scanned your tracks with 1.2.3705 or earlier, then it did give priority to folder.jpg as the first linked picture but later versions will look for Cover.jpg, artwork.jpg and when ticked any template in 'save organised copy' in the artwork preferences.
At some point i'm going to do a re-organise artwork function so i guess that will help you out but in the interim if you are not using the auto-organise functionality you could create a new library and add all files to that library (first setting the artwork prerefences as appropriate)