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Changing that setting did the trick, 100%. Thanks! Also, I re-formatted the .RTF file in Word as if it was one continuous document and Calibre converted it perfectly for the Kindle. Every chapter was recognized and indexed and the correct icon graphic appears in the Kindle menu. Being able to correct errors in the document and then re-compiling into new file is that "selling point" that's tipped me towards ebooks versus print. There's still a long way to go, but I'm on board!
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