I think AZW3 is just a way of coding Mobi books so that they can't just be converted to epub or other formats. Part and parcel of the DRM junk. I could be wrong though. As for why epubs come out looking bad when converted to mobi I'm not sure. Were they DRM free books? If not then it might be a DRM caused problem. And not much can be said about DRM on MR.
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