I received my new iPod touch last Monday and was almost immediately disappointed by what I saw - or rather, what I didn't see! No chapter images for Audiobooks! This morning I let iTunes check to see if there were any updates for the touch and there was one. Don't know how long this update's been out, but it fixed my problem. Here's a picture of the Audiobook file I've been testing with as I work on SSA:
The text on the image is from entries in the POD file (it changes on a chapter basis) which is overlade on the Earth/Mars image at the time the Audiobook is created and placed into the file.
The weirdness on the bottom the of iPod is the protective film which I haven't removed yet.