I think the convertion program that Blackmask uses doesn't work properly. I tried downloading some books in french and all accents and special characters were illegible.
I suspect that the original files contained extended ASCII codes rather than proper Unicode mark up. It's too bad to hear that, but it goes straight to the heart of the matter I've complained about repeatedly - poor proof-reading, or in this case even just opening the bleeding file and checking to see if it looks okay.
I agree that a straight up html reader would be an excellent feature. On the FW Yahoo group, though, all you'll ever hear is "Use the librarian" (I'm on OS X) or "use the content server" (I don't want to be dependant on a service that could go away at any time).
The goal of making the eb-1150 easy to use for one purpose has made it far more difficult to use for the many things people really want to use it for.