Yeah the formatting thing bites. I wish they were formatted for my Reader. Also I should have said public library not local library because I live in Oklahoma but use the NYC public library website. My local library only has audiobooks for free so far. It's certainly a drawback if your local library doesn't have them, but that doesn't mean you can't get them from another.
Here's a link to see if your local library has access to OverDrive's resources:
http://search.overdrive.com/