So far, converting epub to epub trick works best for me. It seems to 'clean up' the file layout of the epub and makes it consistent. It has cleaned up the 'cover' tag problems in every book that I've tried so far and it's easy to batch covert to fix the rest.
To those people adding My Files/Books to the device output path: Why was this needed? Calibre is placing everything I send to the device in this directory already and adding that simply created 2 more subdirectories under "My Files/Books". I'm not sure if this is something that selecting the "Nook Color" from Preferences/Common Options/Page Setup did automatically or what.