All annotations content is contained within sidecar files in the {filename}.sdr/ folder. Copying the new version on doesn't automatically remove them, and they will report inaccurate information about where your highlights are. Annotations are recorded based on file offsets.
Reconversion is liable to make nothing predictable, although if you directly edit an AZW3 and merely swap one letter or another letter everything *should* be fine. (I keep meaning to actually test this theory.
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