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I've upgraded and can confirm the new update works on non Kindle content.
At some point I had a similar experience where the Kindle would not read non-kindle content for me. After some troubleshooting I tracked it down to the mdp files that are generated with the mobi files. A huge pain because that is where the annotations are kept.
What I did was to uninstall the kindle app, delete the kindle directory. Install the kindle app and only copy over the mobi files.
Not sure if that will fix your problem but worth a shot.
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