Oh dear ...
I found out that (as you mention) i needed to use a 3rd party util to put the books on the iPhone. The point is that using iTunes will put the book in the wrong directory.
It seems to work now - except now my iPhone has decided to sync only one-way. I.e. it seems to only receive the furthest read mark from the server and not return it, but this seems to be for all books - even books purchased from Amazon. :-(
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