See
MobiPocket Java Reader on Pepper Pad 3 for a list of limitations of that (similar) version. Reading e-books isn't central to Pepper, so I was hoping iRex would do a more complete port. My main concerns on the PP3 were the lack of line spacing and margin control (i.e. basic page layout options). Also, there is no dictionary support. Are MobiPocket dictionaries supported on the iLiad?
As on the Pepper Pad, FBReader is an option for non-DRMed books if you are willing to go outside the "official" software distibution. There will even be dictionary and bookmark (annotation) support soon (planned for version 8.4).