Maybe this will help...
My BDP-1 is setup with static IP address, for example below I will use 192.168.1.115 (from PC interface: Settings, Network, check Static, enter desired IP address, hit apply, restart BDP)
My music is on USB drive with label "Music" organized on folders Artist\[year] Album. Each folder contains cover picture file "cover.jpg", usual size 450 x 450
I use MPDroid version 1.03.1 (16.10.2012)
I use following settings on Mpdroid:
Download local cover art - checked
Path to music -
http://192.168.1.115/music (is case sensitive, will not work with Music)
Cover filename - cover.jpg (case sensitive)
This was the only combination I could get to display local cover art.