I took a look at your sample on a 700. When the font is enlarged to make it easily readable (the medium setting), each line wraps individually because the document is formatted with hard carriage returns at the end of each line.
It is readable, but does not flow as well as a document without carriage returns that will wrap naturally.
On some of my classic books that are in PDF format, the ones I reread often, I sometimes convert them to .doc files, remove the excess carriage returns and resave them. This is not as difficult as it might seem using find and replace. It just requires three global find/replace entries.
Then you can use word to put them back in pdf format.
What I don't know is how the new reader stores and exports notes that are made on the reader. If you can access the online manual, it may shed some light on this subject.