LRFs display text fully justified (straight right margin); through a firmware hack you can turn off the full justification if you prefer, which will affect all LRFs books.
Although the epub format supports left and full justification, the version of Adobe ADE that the Sony PRS 505 uses will only display epubs with left justification. There is no way round this, unless Sony releases a firmware update (very unlikely in my opinion).
You may or may not want full justification, it is very much personal choice. I was very much a full justification kind of guy, but now I have gone to the dark side and have let the evil left into my life.
Adobe ADE also displays epubs with the page number in a small font in the right hand margin; if you like small margins like me, then often the page number will obscure some text. Grrrrrr. Whoever thought of this feature needs a good spanking! Again this would require a firmware update from Sony.
I believe the 900 does not have these two failings for epubs; hopefully the new Sony models (if they truly exist) will also support full justification and no dumb page numbers.
Despite these drawbacks of epubs on the PRS 505, I would still recommend the format because of its future proofing. New devices always support epub (unless you are Amazon), whereas LRF is dead.
I'm not sure what you mean by flow? I have not noticed any difference between reflow for LRF or epub.
With a little hacking you can change the default font for either format. If you are into editing the ebooks themselves (to adjust margins, font sizes etc), then epub is definitely easier than LRF, however an LRF ebook does have the advantage of being a single xml file, whereas an epub is a zip container of many files. You can use the excellent Sigil to edit epubs (if they have no DRM); the editing tools for LRF are much more basic.
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