Yep. (I think) I've verified that it doesn't do any database queries if it's set to 'Manual...' It seems to need restarting to change a preference setting, which was fooling me a bit yesterday. But I'm pretty sure it was set to "When track starts playing" when I first looked, and I'm also sure I never set it before.
I was also puzzled by there not being any apparent download of the art, but of course it's being cached (~/.cache/vlc/art/arturl). I still haven't figured out what the IDs in that directory connect to -- they aren't visible in any of the other downloaded data.
I'm much happier not having all my music selections broadcast to the cloud (:-/), though I guess they're only actually being used to locate the cover art.
-- Pete --