[black_eagle]

1) given the settings, where Kodi is getting the 2CD art from,
2) why it is displaying it (given the settings), and
3) how I can force it to display the correct art for each album?

1 & 2 I can't answer at the moment, maybe @DaveBlake can offer some insight there.

For 3, open your library and navigate to an album showing the wrong art. Press <i> or otherwise open the album info dialog and click on the "Choose art" button. The first entry should be labelled "Thumbnail" and will be the wrong cover. It will also be highlighted. Click on it or otherwise select it and you will get a dialog box with entries of (at least)

• Current art
  
• Local art
  
• No art
  
• Browse...
  

If "local art" shows the correct album cover then click on that.  If not, select "browse..." and in the next dialog box choose "*item folder".  This will take you to the directory containing the songs for that particular album. Assuming your directory does indeed contain "folder.jpg" then you should now be able to select that.  The "Choose art" dialog box will now appear again and should now show the correct art.  Press <back> or <esc> to close the dialog and go back to the music library which should now show the correct cover for that particular album.

In the main, art works really well, but occasionally Kodi may need a "prod" to get it to show the right stuff.  Fortunately, this isn't difficult to do for the odd instance when it's needed.

HTH