To open up the discussion a bit at this point (will read the posts in between my last quite emotional response shortly) - if you havent read it already, read A. Shepards blogposts on Kindle .kfx formating, typesetting and Amazon conversion practices.
You can find them here:
http://www.newselfpublishing.com/blog/
While they are a very interesting read on their own, they also add context regarding the angle we are looking at in this thread.
If you are a lurking Amazon marketing honcho - probably the same one, that so effectively delayed the release of the current jailbreak - regardless of how this standoff plays out - get management to create a new fulltime position to go through everyone of those three blogposts and make sure to address every detail in there. (And keep this person in the same role from now on. So you get input before you create rendering engines that aren't up to the task.)
From hyphenation thats only expanding (and not shrinking) inter word spacing, to breaking at dashes, to forced paragraph spacing to the mess that is image conversion right now (which sounds just like a real structural problem with your workflow) - and if you don't -- don't expect people to follow the "Amazon knows best" line of argument, you currently try to establish around the .kfx problem.
Also - get some half decent serif fonts together while you are at it. Bookerly might be your best one so far, but it is only mediocre compared to Andada Regular (f.e.) and some other ones I've used on the new PW. Andada is especially interesting, as it shows that the "bold lines" approach ("bold fonts are more readable") isnt actually true (anymore, dpi might play a role) for reading on Kindles.
-- end digression - and if you currently are in a wtf mindset, after reading the last paragraph - try it, preferably before commenting on it.
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And to bring this around to be on topic for our little discussion in here again - the three blogposts from A. Shepard as well as the picture that can be established on how Amazon handles rendering, format choices, defaults and layout and did so in the past - are ample proof for them being exactly the wrong guys to entrust with the development of new electronic book formats. Which curiously all turn out to be increasingly proprietary and then being forced onto customers without even an opt out.
The smarts entirely stopped with the mobi buyout - then they neglected any need for hyphenations for years, then messed up the implementation - then made it a feature exclusive (softhyphens are a great way to ruin your books code for posterity...
) for their new file format - which only they can produce (*waveat* publishers), and then mess up standards and best practices.
Also - in the blogposts you find another mention, that right now publishers and authors dont even have control over the release of final versions of their content. Not only are they waiting three months and more for an Amazon bot to show up and trigger conversion to the .kfx format, rollout of changed versions after that point is messed up, and not only is it messed up, the layout decisions Amazon decides to be "best for everyone" (extra spacing after paragraphs, because our authors en large cant format a book - so lets go with the lowest common denominator...) are actually quite horrible.
So is the idea to still have publishers and authors do the mastering in azw3 which then gets converted - but hey, we all know why Amazon wont be releasing any authoring tools this time around.
Also - if it isnt apparent by now, no - .kfx certainly is not a "delivery format" - its a file format, no one but Amazon is allowed to create anymore. Thought I repeat that one again..