I successfully changed a .lit with DRM to .lit without DRM and tested the file on a PC without microsoft reader activation and it worked.
Conversion using either libprs500 GUI or commandline only gave me the first 3 pages (Cover, publishing details and index) (so 3MB .lit file became a 99K .lrf)
Loading the .lit into bookdesigner produced only the first 3 pages.
Converting to .html made a mess of it with chinese characters (english OS).
BUT I could convert to .rtf using
http://www.processtext.com/abclit.html then copy and paste the first 3 pages from bookdesigner into it.
The resulting .rtf was able to be converted to .lrf thru libprs500.
Two key points I want to make:
1) When all else fails abclit will do the job
2) I did however lose all the links (eg chapters and notes) and have generally lost links with all libprs500 .lit to .lrf conversions - is this normal?
Hope this finding contributes to those with .lit files that will not convert easily to .lrf - I did not see mention of abclit before, should someone make a sticky??