MobiPocket does have this limit but using BMP files to show the limit is not reasonable as BMP is terrible in its use of space. Reasonable sized images can be obtained in gif, png, and jpeg using a 64K limit. One reason that images are sometimes small in mobipocket is that publishers and authors don't use the tool to its full advantage. You can actually embed 3 different image sizes for different devices but if you don't it will have to assume a small image to work with all of the devices.
When Mobi-pocket began they were on 160x160 devices that did not have the horsepower to reduce images on the fly. MS reader is targeted at at 240x320 devices with enough horsepower to reduce images (the latest version of the reader even have a view image command that can zoom the image). But even so, small devices tend to dictate limitations in both formats. 240x240 in phones for example.
Dale
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