Came across this thread doing a general google search for problems with Instapaper epubs. I have a Nook Simple Touch (1.1.0) and have rendering issues also. It will skip entire articles. The page number display at the bottom will do crazy things like jump from page 3 to 32 with no way to get to the pages in-between.
Hopefully Instapaper will fix their bad code. In the meantime you can use Calibre to clean up the bad HTML. Use the "Convert books" feature to convert from epub to epub. I've had some success with this.
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