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I've used the option before, and where it definitely messed up is the single quote in front of words like 'Twas. It put the wrong direction smart quote there as if it was starting a new quote.
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That's a known issue with the Smarty Pants code that calibre uses. It makes no bones about not being able to deal with that particular situation.
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Algorithmic Shortcomings
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One situation in which quotes will get curled the wrong way is when
apostrophes are used at the start of leading contractions. For example:
"'Twas the night before Christmas."
In the case above, SmartyPants will turn the apostrophe into an opening
single-quote, when in fact it should be a closing one. I don't think
this problem can be solved in the general case -- every word processor
I've tried gets this wrong as well. In such cases, it's best to use the
proper HTML entity for closing single-quotes by hand.
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