Originally Posted by
guino
The files it used to save were HIDDEN, so I'd advise checking the files with a tag application. I'll try it myself to check and let you know.
EDIT: I just verified it and like previous WMP versions it saves album art files as hidden files in the same folder of the song -- it does NOT embed the art in the file itself. It does however appear to cache in the images other than just in the files it saves (Probably in some database organized by filename). You can also double check it by opening winamp and check the file's properties to see if there's an embedded album art.