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Sync over WiFi is for the kepub formatted books and the sync is performed on the Kobo servers. Once you have added your phone hotspot in as a WiFi network, you should be able to do this. I do it all the time using my Nexus S phone.
If what you are wanting to do is move some other kind of book over WiFi to your Kobo, the only suggestion I have is to put the books into dropbox and use the browser on your touch. Some folks can do that, for some reason, I can't. Same for Calibre server.
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