I don't want to be argumentative, but imagine a 400x350 image, and an 800x600 screen.
How would "height:100%" make it fit the screen? It would be shown at double size, and that'd make it 800x700 (matching the screen's height, 800, assuming that's portable in ePub) and it would be 100 pixels too wide. It's only if the device tries to be smart (and in doing so ignores the CSS) that it may fit
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