Yup... you will have to do it all over again....
Having messed around with this a bit what seems to happen is...
1) Pasting or dragging artwork onto WMP11 does not embed the artwork in the MP3 files but creates 200x200 Folder.jpg and AlbumArt**** files. Regardless of the quality/size of the orginal image it gets scaled down to 200x200 and looks crappy. This is NOT a bug but is how MS wants it to work.
2) Using the advanced tag editor in WMP11 to embed cover art into the actual MP3 files also resizes the image to 200x200 before actually embeding the art. Again this is how MS wants this to work and does not consider it a bug.
3) Using a 3rd party tool such as Mp3Tag to embed artwork will add the artwork at its orginal size without any resizing. However, when WMP11 scans and builds the library it will extract the image and resize as a 200x200 file named, as in point 1. It also create a cache with 200x200 images in the WMP11 artwork cache which it will use in preference to the actual image in the file. By deleteing the cache and the created albumart and folder files you can force VMC to use the actual embeded artwork, but i find that it is not displayed when the track starts playing but only if you skip back and forth between tracks... although others have not seen this behaviour.
4) Using Folder.jpg images created by yourself should work but doesn't... this is a bug and will be fixed at some point. But will only help those who prefer the manual folder.jpg creation method.
5) Ripping with WMP11 works perfectly at this time, and although it does create 200x200 files these can be replaced with files of your own and will still continue to work. (Although media center artwork cache needs to be cleared before the your new files will be used.)
All in all, not very satisfactory... MS has a fixation with 200x200 images which look crap, add to that the fact that WMP11 does not embed the artwork that you tell it to without first rezing it MS have kinda bodged the whole artwork thing (IMHO)