Thanks for responding, pdurrant. The original file size of my images is not the concern. I spent a lot of time optimizing them. Even the big ones don't go beyond 35 KB and they average about 15-20 KB. The transparent GIFs are under 1 KB. (To see what I'm talking about, I've posted flip books at the "Our Books" section of Freaky Dude Books. I hope this doesn't sound like self-promoting. I'm just trying to demonstrate.)
But if I submit GIFs to KDP which are way smaller than that 127 KB limit, will they remain GIFs? They seemed okay on the Kindle Previewer, but all my PNGs had colors were very pixilated or inaccurate. That's when I converted all the PNGs to GIFs. Your info about the three part Kindlegen output is a great relief.