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@odamizu: The algorithm used for encryption doesn't matter. Since other experiments have shown that the same encrypted KFX file collection works on multiple devices, that implies that whatever the algorithm, it is based on a key that is not device/account specific. So what is needed is to figure out what that key is and extract it. Once that is done, all KFX files will be decryptable trivially (that is assuming there is not another layer of separate device/account specific DRM underneath).
The problem is more a human one. The advantages that KFX brings are so minor and individual device specific that I doubt anyone is likely to spend the time to break the obfuscation. I know I for one am not motivated to do so.
From what I have been able to deduce, KFX contains images and probably text that is pre-processed/changed to work for the particular device the KFX is sent to. As such it is fairly pointless as an ebook format, in that it is not suitable a source for conversion to another ebook format. About the only thing one would gain by reversing this format is the ability to generate your own KFX files to send to your particular Kindle.
EDIT: And I should say that in the long term this is likely to be a dead-end format anyway. Since the capabilities it brings are perfectly possible by just improving the text rendering engines for normal epub/azw3 files.
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