Steve,
On disc 3 of the Dave Shulps interview starting at 19:00 ish Jimmy speaks briefly about the HOTH album cover.
He does not mention the specific inspiration for it but does say that Hipgnosis was involved and of course mentions the known troubles with color and all.
However in another interview in 1977 Titled 'Jimmy Hotel 1977' for which I do not have specific details as far as date & interviewer he does indeed mention the Midwich Cuckoos....not everyone kept details and notes like you.
Have a listen here:
http://nechtytla.tripod.com/midwichkuku.MP3
tripod's funny, you may need to save it to your hd first to listen.
So not necessarily mentioned as an inspiration, but more so that the children remind them of the movie. So does this still remain a mystery ? Also, any trainspotters out there that can indentify that interview, done on the 11th floor of a hotel whislts waiting for burgers to quell that mystery ?
I remain,
Nech