Under Windows XP, K4PC stores cover images in
Code:
C:\Documents and Settings\<UserName>\Local Settings\Application Data\Amazon\Kindle For PC\Cache\covers
I assume these are downloaded from Amazon's servers if the ebook has no included image.
EDIT: I now think any new covers are downloaded from Amazon servers whenever you open K4PC. I see covers there for ebooks that I have never downloaded to my PC, and the covers downloaded today are for my recent ebook purchases. This probably means that K4PC never looks inside the .azw file for the cover. With this approach it can always show covers for "Archived items"