Last Mobipocket eBook I tried to convert had rhe same problem. What I did was convert the PRC to HTML using mobihuff, pulled out the graphics using mobi2html and formatted it using Book Designer. It needed mobihuff because it was huffdic compressed and mobi2html is able to pull out the graphics even though it cannot conver a huffdic compressed eBook to html.
I'm finding that mobi2lrf does have issues. What you can do is go to the Libprs500 website and put in a ticket. But also attach that eBook in Mobipocket format that has the problem.
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