As GeoffR mentioned, 2.4.0 and 2.5.2 don't save the cover images for books on the SD card. But, for 2.5.2, I believe this is a bug. Saving the images started with 2.5.0 and was in 2.5.1, but both these generated lower quality covers than they did for the books in the main memory.
With 2.5.2. the image seem OK, but the sleep/power off cover is a text only cover that shows the title and type of the book. It only happens for books on the SD card. This is definitely a bug and I know Kobo have looked at it. Not saving the cover images might be deliberate, but if the image files exist, they are used. For that reason I think it is a bug as well.
The main reason to mention this is that using the SD card to avoid the cover issues, is probably not going to work long term. I hope that both these problems will be fixed in the firmware version.
Right now, the simplest workaround is shortening the length of the path used for the books and hence the image file names. But, I don't really know how much of a benefit that will be.
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