So, it took a while and i finally figured out that if you rename the picture of the dvd cover you want to use for a particular movie to folder.jpg and throw it in the same folder as the movie, XBMC recognizes it.
However, once i realized that the particular skin that i want to use (Aeon) does not display horizontal covers without distorting them. i got kind of frustrated and found new, vertical, covers to replace the distorted ones. I threw them in the folder, renamed them to folder.jpg and deleted the old ones.
This is where my problem starts. The new dvd covers did not appear in XBMC. The ones i replaced are still set as the covers.
Is there anyway to change the original cover art that i set using the name folder.jpg to a new cover?

Here are the things i have tried:
Reinstalling XBMC and Aeon after changing to the new covers
Using Disk Utility to erase the empty space on my drive (figured XBMC was picking up my deleted cover art)
Resetting my computer
Resetting my external drive (where the pics and movies are stored)
Purging Aeon (an Aeon option that clears personal data)
Yes the the pictures are named "folder.jpg" lowercase and all

I think i tried a couple of other things, but i have forgotten.

Please, if you have any suggestions, I would love to hear them.
I just want to change my cover art

Thanks!

@iamjarrad
You could try rescanning the particular entry or cleaning the library and see if that helps.

You are far better off asking the same question on the main XBMC forums though (choose the right on per your platform)...
http://forum.xbmc.org/

I figured using the official XBMC forums would be good, but i havent been able to connect to their site since a little bit before i posted this thread.
Ill give your suggestions a try.
Thanks!

For anyone interested or having the same problem, i stumbled across the answer! Dont ask me why it does this, cause i have no idea.

ANYWAYS, if you want to change the cover art for whatever reason, and you cant do it how you assume would be the normal way, here is how.

You have to rename the original folder that the movie file and folder.jpg cover art is in and then start xbmc back up. Thats all! Because all my folders were the name of the dvds, and i did not want to change that, all i did was put a space at the end of each original file name.
If you try to change the file name, start xbmc, quit xbmc, and change the file back to the original name then xbmc will switch back to the original unwanted folder art.

Weird.

It kinda makes sense, Xbmc won't see the file anymore, it will purge it from it's cache or library and then on rename back it will see it and update it.

Maybe when it XBMC.org comes back you can post that as a bug in Trac to get fixed.