Mobile ADE does not implement automatic hyphenation. I have seen (unofficial) reports that this might be on Adobe's short list of desirable improvements, but Sony is unlikely to upgrade existing devices even if Adobe implements this. The PRS-300 might support soft hypens (the PRS-505 did not), which you can test using the .epub from Soft Hyphens
. Note that Jellby posted a better epub at the end of the thread.