If you're creating a catalog to be read on the Kindle, you need to specify Kindle as the output format, which causes the covers to be properly scaled for the Kindle. Because you're starting with epub, the images are scaled for epubs.
Images on the Kindle are scaled differently than other ereaders. The catalog generation code needs to know the intended ereader to scale images properly. Because of the intermediate conversions you're doing, the scaling ends up wrong.
You could try generating for the Kindle initially, converting that MOBI to EPUB, doing your edits, then converting back to MOBI, but I have no idea if that would introduce other problems.
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