Hi Bob,
I know it should go into the MyLibrary file, and it's so frustrating that I can't get this figured out. I'm pretty sure it did happen to someone else here at MobileRead, because I was able to find an old thread here that pointed me to the litpath.lpt file associated with MS Reader. When you open litpath.lpt with Notepad, you are able to (albeit a bit tediously) sort through the gibberish until you find the path to the temp folder the .lit file is in. Which makes me think that if I could somehow change the default file association for downloads in MS Reader, maybe that would do the trick?
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