Album art is usually associated with albums, not songs. Cubed can automatically determine album art and download it for you, but I don't know how well it works with individual songs (if at all). If you want to try out Cubed, see: ³ - Android app on AppBrain
I haven't noticed any problems with the tracing path in Swype. I am running the unofficial 2.2 update (I don't know if you are, though). I didn't have any problems with 2.1, either, other than my fat fingers ;-) In regards to the popup window, the problem is that you have words hiding other words (which I asume you are aware of). Swype automatically adds words to its database the moment you enter a space if you tap-type them in. So, if you keep entering invalid words they will keep getting added back to the database, in which case you will have to remove them again when Swype finds a closer "match" (i.e. it hides the word you really wanted) to that invalid word when you swype text. There doesn't appear to be a way to disable the automatic addition of words to its database, which would solve the problem.
Hope that helps.