I have just updated my WD TV Live to last firmware 1.4.22. I’m pleased to announce you that the problem with movie artwork in separate jpg files is now solved. Simple putting a PERIOD (.) at the very beginning of the .jpg file name causes the thumbnail for the .jpg to disappear while leaving the correct thumbnail for the video file.
For example : Invictus.avi and .Invictus.jpg in the same directory
You can get more information in this post : http://community.wdc.com/t5/General-Discussions/Thumbnail-images-and-network-shares-SOLUTION/m-p/23610/highlight/true
It worked like a charm for me with last firmware !