What is the appropriate size for album art to display correctly the iPad's retina display?
This is difficult to answer without any of us having access to an iPad with the retina display.

Therefore, I'll suggest the resolution which Apple provides when you get your covers via the option Get Album Artwork in iTunes. I hope this is fine, as long as you do not use coverflow in full screen mode.

The dimensions are:


max. vertical: 600 pixels
max. horizontal: 600 pixels


If a cover is not square, then one size dimension has less pixels.