Sorry, that's the best advice I can offer. Not sure why your artwork isn't appearing. Here's the section of advmame.txt that describes the use of artwork...
7.5 Display Artwork Configuration Options
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---- 7.5.1 display_artwork ----
Enables or disables the artwork display.
display_artwork yes | no
Options:
yes - Enables the artwork (default).
no - Doesn't display the artwork.
---- 7.5.2 display_artwork_crop ----
Crops the artwork at the game size.
display_artwork_crop yes | no
Options:
yes - Crops the artwork.
no - Doesn't crop the artwork (default).
There's no mention of defining the artwork directory in advmenu, but you might try sticking in a line that looks like this...
emulator_artwork "advmame" "C:\MAME\ARTWORK"
I haven't really tried to see if it's working on my machine yet, so I'm just going off what the documentation says to do.