OS X informed me this morning that a new version of iTunes was available: 7.0.1. Given the showstoppers I noted previously, I was keen to try it out. I updated the PowerBook, and then headed to my Windows XP machine to update there. The first curiosity was that iTunes 7 informed me (by way of the Help > Check for Updates menu item) that it was already the latest version of iTunes, and there was nothing to upgrade to. Healthy skepticism took over, and I checked with Apple's website. There was, indeed, a corresponding 7.0.1 update for Windows. I downloaded and installed.
After the briefest of testing, I can report that one of the two problems I observed earlier has been fixed: there is no longer any evidence of playback distortion during heavy processor load. My very technical testing involved simultaneously downloading a large file, playing a video on Windows Media Player, running the EVE Online client, and listening to a track in iTunes 7.0.1. I could not detect any problems.
I'm still not getting the newly-downloaded cover art sent to my iPod during a normal update, however. Maybe this is simply working as designed—can anyone tell me?