i've done some tests. If the cover.jpg file is linked then it gets moved with the re-org and the old folder is deleted.
if its not linked, it doesnt get moved so remains in the old folder and hence the old folder is not deleted.
the way artwork gets linked is when new files are added to the library, any pictures that match the rules in Tags(1) artwork settings are automatically linked to music file. So if Cover.jpg is ticked, it will get linked (but thats for new files only).
Even when a picture is not linked, when playing a music file MB has some logic to auto-search for a picture, including cover.jpg so thats why you would see the picture when playing the music file.
I need to think about what changes i will make for this - what i will probably do is enhance the consistency checker that runs in the background on startup and automatically link any new artwork that matches the Tags(1) artwork settings.