You're right that this is also a known issue with the Kindle, Byron. It does do full justification, but it seems to be that, when a line of text would have to be stretched beyond a certain point (i.e. when the gaps between words would have to be expanded beyond some limit coded into the Kindle's operating software), the Kindle simply dispenses with trying to justify that line, but continues to apply full justification to the rest of the paragraph. It's an issue that is more usually handled, in word processors and DTP applications, by enabling "on the fly" hyphenation, but, so far, automatic hyphenation isn't a feature available on the Kindle. So, for now, we end up with occasional lines of text that aren't fully justified - probably preferable to having occasional lines of text with huge gaps between the words.
P.S. Glad to hear you managed to eliminate the formatting problem when jumping to named locations!
