The apparent size of the line-height depends of the font. A line-height of 1 might look OK for some font, too large for some other font, and too small (overlapping lines) for yet another font. This depends on how the fonts are designed and how the glyphs fit (or not) in their boxes. So, try with another font, or modify your preferred font with Fontforge (I believe HarryT wrote something about this a long time ago, probably in the Mobipocket or Workshop forums).
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