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The best way I've found, through many internet searches, to get rid of the album artwork in the gallery is literally to to through and delete them. It sounds like a pita, but with the batch delete(checking the box for all the album covers before hitting delete) it doesn't take long. This doesn't delete them from your media player, they just don't show up again in your gallery.
And I'm not sure about your pictures not showing up except maybe that it only shows pics in the "camera" folder in the gallery? My stock default folder for my pictures is "camera" and everything shows up in there when I take pics/vids.