You'll have to either turn off the automatic meta data update in zune software or manually add album art to the zune software in the "collection".
The reason why the album art shows up in your music folder because windows automatically use the pictures in that folder as the album art.
Zune software requires the picture to be named ZuneAlbumArt.
There's a trick floating somehwere in this forum where it explains how to let zune software use the pictures in the folder rather than ZuneAlbumArt pictures.
There's no 16bit version of zune software. Are you using windows vista 64bit version?
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