Hi Mike,
I had some issues with the folder as well, mostly because I didn't properly extract the files the first go-round. Never was prompted for a password, though. When I extracted The Suburbs Digital folder, it opened up a couple of other folders, including another zipped folder w/ the synchronized works, which I then extracted and was able to add these files into itunes. Didn't get to see the artwork change until I clicked on the little down arrow in the box that appears in a set of buttons on the bottom left side of itunes. Imagine you've tried all these things, though.