OK, one thing I just tried is to delete the encryption.xml file that InDesign produces. If I re-zip the ePub the fonts still do not work. BUT if I swap out the fonts that InDesign puts into the ePub with the original font files, THEN I get an ePub with working fonts that DOES validate. Soo... that leaves me wondering:
Should the fonts in the ePub be:
A. the original font files
B. the ones InDesign adds (which are a smaller filesize than the original so they are obviously changed somehow, probably encrypted somehow)
C. something else. Is there some way to make a reduced filesize version of the font that I should be using in ePubs? If so how do I make that? I bring this up because I know websites like fontsquirrel.com have a font-face generator to make web optimized versions of the font files. Should I be using that for ePubs as well?
And lastly, is it OK to not have the encryption.xml file in commercially sold ePubs that contain embedded fonts?