This is a technical problem I ran into that, when Googled, led to a lot of partial solutions and dead ends, so for almost two years I just sort of dealt with it. But I've finally worked it out now, and in the interest of documenting these things where the crawlers might be listening (and just in case anybody here happens to be currently dealing with the same thing), this is what was happening and how I fixed it.
The problem was that every audio file which had no embedded album art and was located in my Downloads folder, when opened in VLC, displayed the same specific wrong image as the album art. Incredibly the image itself breaks my anonymity so, for demonstration, I've used a spooky ghost here.
In the end, this had absolutely nothing to do with VLC's settings or cache, or "Allow metadata internet access", or anything being embedded into the files themselves that could be removed with Mp3tag, or the \vlc\art folder. These are all things I attempted to fix first. What was actually happening:
VLC will scan the folder audio files are in for a list of image file names, and if one of those files exists, will display it as the album art. At least two of these files are hidden by Windows and might be automatically generated by some programs.
This is not properly documented anywhere as far as I can tell, which is why it took me so long to work out what was going on. Based on the source code, the list of files that VLC looks for is:
Folder.png
AlbumArtSmall.jpg
AlbumArt.jpg
Album.jpg
.folder.png
cover.jpg
cover.png
cover.gif
front.jpg
front.png
front.gif
front.bmp
thumb.jpg
If any of these files are in a folder, it will be used as album art for everything in that folder. In order to banish these spirits and get the VLC cone back, all you need to do is delete all of them from that folder.
...which is made slightly more difficult by the fact that the two I was dealing with, Folder.jpg and AlbumArtSmall.jpg, were hidden by Windows. I thought I had it set to show hidden files, but apparently not. The way you change this setting is brilliantly obtuse: from File Explorer, go to the View tab, then the button labelled Options, then the tab also named View in the popup window that opens, scroll down to "Hide protected operating system files (Recommended)", uncheck that, hit Yes on the warning that such files are required by Windows, and finally Apply.
It should go without saying that Folder.jpg and AlbumArtSmall.jpg are not actually required to run and start Windows. So it's kind of annoying that they are hidden in this way. Once you've done all that, you can finally find and delete them. Alternatively, you can just use Everything for that (which I highly recommend having installed anyway), as it seems to be willing to show and delete everything regardless of what Windows thinks about it.
I'm not completely sure how I ended up with Folder.jpg and AlbumArtSmall.jpg in the first place. The image they got stuck on was an image I was attempting to add as album art to one specific file. I believe I did it wrong at first without realising, and so that artwork would go on to haunt me, until now. Finally, now, the ghost is gone, and the familiar orange traffic cone is back in its rightful place.
...of course, if you actually wanted a specific image to come up for every file in a folder, maybe if you wanted to edit the VLC logo a little, you can do the same process in reverse.
