Hi all
Just did the whole process again, and it turns out that I must have, some way, for some reason, decided to have the conversion process produce the "both" mobi output

Too old, have slept too many times since then, to remember why

This time I made sure that the convertion settings for Mobi Output were set to old, and the mbp file is generated on K3 when reading, and it imports correctly to Calibre using Fetch annotations.
I probably decided to test the new features of FW 3.4 without knowing the possible consequences.
Note to self: when doing such experiments, PLEASE write it down on a paper pad, to remind myself days, weeks, later when I don't understand what's going on.
I must admit that I didn't follow all the threads about KF8 that closely since it didn't seem like it would be avaliable for the K3. So all this might have been discussed before. If so, again sorry ..
Hopefully this can help some one else from making my mistakes.
Or at least to make choices knowing the consequences.
IF you choose Mobi Output option Both, mbp files will not be created with a K3 FW 3.4, since it'll use the KF8 format book. Reading status is tracked in the han file, which is not read by Calibre's Fetch Annotation function.
I might be wrong but this is what I conclude from my experiments.
Cheers,