I just updated Kindle for PC to the latest version.. .and books that were last week downloading as Mobi format are now downloading in KF8 Format. The drop caps on computer screen looked perfect, so I suspect this is part of the books being updated to new typsetting standard. The dropcaps specified line height of 1 as part of their formatting (which doesn't work on Kindles, at least, with traditional firmware, since the line height would never go below 1.2), and the body css includes -epub-hyphens: auto
This might just be clutter from poor epub being fed to amazon, (both books I sampled were from the same publisher/series) but I'm starting to suspect that the new typesetting engine is just better support for epub css (obeying smaller line heights and hyphen rules, for example) and not any kind of special flag in the book.
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