Whoops - I failed to read part of your post.
I recall reading on another thread that AZW3 might not be supported on some devices, unless the file is downloaded from Amazon - something about the DRM code auto-embedded into AZW3, or somesuch. Maybe someone else can clarify better than I. The reason I think this may be true is that my Kindle app on my iPhone cannot read the AZW3 files that I create for my ebook. I can, however, read the files using the Kindle app on my Mac.
You might be able to read the book on your Paperwhite if you convert it to MOBI instead of AZW3 in Calibre, however.
Re: the margin problem, the other fix/hack I suggest trying is to enclose the offending <div> in a container with a display:block property. Seems to remedy many conversion ills for me:
In between your <style></style tag>, add the following:
.container
{
display: block
}
Add the corresponding HTML to your Chapter tag:
<div class="container"><div class="Chapter">CHAPTER TITLE</div></div>
You can use whatever you like, instead of "container." By the way, I also suggest correcting your style tag syntax to comply with standards:
<style type="text/css">
And finally, you might find it helpful to run your file through the W3C Validator at
http://validator.w3.org/
Good luck!