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When you "save for web & device...", if you click the "Color Table" menu, you can then load the correct palette for your kindle. Photoshop defines the palette by best guess, but forcing the kindle's palette will preserve more colors in the end.
I've attached the Kindle2 color table (which only uses 15 different colors, not 16). Someone should probably create one for the K3 and see if it's different (as in using all 16 colors).
Also, the diffusion settings in the "save for web & device" dialog are really quite excellent.
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