Hi Guys. Formed lurker here, but I just sussed this so I thought I'd register and post.
To get this working again you'll need to jailbreak your phone so you have some way of directly accessing the application folders (such as Iphone Folders http://iphonefolders.com/
It appears that the iphone app is assuming that anything in the folder where it keeps stuff that was 'sent' to the app is proper kindle content, whereas anything sideloaded through iTunes is external content therefore there's no point trying to whispersync it. I guess they're assuming no-one would bother downloading and installing proper amazon content from a PC when you're iphone is already connected to the internet...
So the solution is nice and simple. Find the kindle application folder (in /var/mobile/user/applications) then put the book in the 'Library/ebooks' folder (loading through iTunes sticks it in the 'Documents' folder instead.) The little refresh button will no longer be greyed out on the book, and it syncs as before.
this works fine with .mobi or .azw files.