iPeng seeing no covers from Squeezebox Server

Hi guys,

I hope some kind soul can help me with that:

I have Squeezebox Server installed on a Mac Mini (10.6.8 Snow Leopard Server) as follows

Version: 7.5.4 - r32061 @ Sat Mar 12 02:03:27 PST 2011
Server HTTP Port Number: 9000
Operating system: Mac OS X Server 10.6.8 - EN - utf8
Platform Architecture: x86_64
Perl Version: 5.10.0 - darwin-thread-multi-2level
MySQL Version: 5.0.22-standard-log

I am not able to see covers in iPeng, they are shown black with a disc image inside and white with a note sign inside.
Very small amount of the cover art images are loaded. The library itself is perfect, all cover art images are embedded.
Also, I didn't had those problems with the previous Squeezebox Server installed (don't remember the version right now).
I reinstalled everything, new iPeng version, new iTunes version, other iDevices tried, still the same. The only thing I have not tried is the upgrade the Squeezebox Server.

Which SB server version would you recommend to upgrade to?
Found numerous threads about not showing cover art where root cause as most at the media file level.
I had also some conversation with Pipin about this some long time ago, but couldn't identify any issue...

Thanks much!