>So a deal is a deal, if one agrees to the terms of a deal (oral or written), it must be honoured

Sure thing. The deal was for an album cover. Perhaps $1500 in 1970s money is a fair sum for that, even for an iconic album.

Did the deal also include T-shirts, posters, and exclusive prints of the said cover signed by the band's front man?

That's where the contention is. Some people would say yes - work for hire is work for hire. Some people would say no. Pre-1978 copyright law is one side, later versions - on the other.

A deal must be honored - so it was, and then it was not.