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This is not to excuse anything in particular, but I've had great luck with uploading my stuff to Smashwords and having the formatting look good, including chapter headings, etc. I work in openoffice and save as a word document. Before I format it for Smashwords, i remove ALL formatting, then go through and add a single style for my chapter headers (certainly I'd imagine one could add a couple other styles if one wanted to do so), and then I format it exactly how i want it for Smashwords, which is basically just page breaks for every chapter, centering my asterisks for section breaks, and adding the chapter header styles. I also add the bookmarks to be used by the table of contents links, which I create basically at the end of the process. It takes about 90 minutes soup to nuts for a 100,000 word book.
regarding the duplicate cover, I do not include the cover in my word document when I upload to Smashwords. This means that a single version of the cover will appear in epub and pdf formats (the one we upload separately from the word doc), and no cover will appear in the mobi files. Not sure the reason for this but it seems to be how the meatgrinder works. I upload my books directly to kindle store separately anyway, so this is a tradeoff I have no problem with. But I'm sure that explains what you saw with duplicate covers on some books and not on others. IMO a great update to the meatgrinder would be to have authors NOT include the cover in their word doc and to include the uploaded cover in all formats. Perhaps that update has happened already, not certain.
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