I don't see any short term alternative to MOBI, but it isn't a good starting point for format shifting.
MobiPocket HTML is nasty, here is a recent discussion: The Mobipocket format: Starring Leonardo diCaprio and Kate Winslet
. LIT HTML is still old-style, but at least it has CSS and if you explode a LIT you get a OEB document directly (e.g. it will have a OPF file for metadata). There are not many tools for OEB files, but oeb2epub
converts it to an EPUB.
The issue with images is partly that MOBI is packaged as a palm PRC file, which limits images to 64KB. There was also originally no JPEG support. LIT images are usually JPEG, and there is in any case no limit on image file size for LIT. MobiPocket now allows JPEG, which can be made to fit in 64 KB without shrinking the image, but most MOBI e-books use GIFs and have smaller images than the corresponding LIT. So using ConvertLIT and mobigen.exe to make a MOBI from a LIT often gives you a better MOBI file than the one produced by the publisher.
Some e-books are MOBI only, and it is probably a good thing that most of these are hidden by DRM because MobiPocket has quite a few non-standard extensions to HTML which are likely used liberally in such e-books.