If you were working with MP3, or FLAC, or OGG, or... any other audio format than M4A, the ffmpeg method you are describing would work perfectly well. As it is, for some reason M4A files store the album art in a different way, so you'll have to use a different tool to add in the album art, like AtomicParsley:
AtomicParsley input.m4a --artwork cover.jpg --overWrite
If you are actually trying to create a video by combining the audio and image, then your ffmpeg command should work perfectly well... are you sure it's not just the player software upscaling the video? Try running
ffplay test.mp4
...and see if it comes out the correct size (ffplay
is a simple video player bundled with ffmpeg, by default it doesn't do any fancy stuff like upscaling).