Same issue here.
No artist artwork showing up in the background anymore, and as far as I recall (ever since the Win8.1 developer preview days) - several artists used to have background pictures (some were inaccurate but got fixed along the way). But throughout all the recent app updates, all these artist backgrounds seem to have systematically vanished.
Background artist pictures only appear when I play/stream music from the music store, but not when I play from my local library.
All the music I have on my phone is what I've imported from the PC, it wasn't bought from the store itself. This could explain why it doesn't have these nifty features.
Live tile no longer shows artist pictures either, just the scrolling name on a green background.
Show now-playing artist on lock screen no longer works either.
However, album artwork shows up just fine.
Xbox Music is seemingly getting worse with each update.
I WISH I could have artist backgrounds on every artist I play regardless of whether I bought the music from the store OR imported my own from the PC.