[rashkae]

the drop cap placement is because Kindle does not allow Line Height of less than 1.2em, (or 120%.).

There are several older epubs that used Line Height of less than 1 as part of their css. it looks fine on a standard compliant viewer, such as most epub readers, but the Kindle will muss it up.

This has to be fixed manually.. In Calibre, you can edit the epub, find the css that corresponds to the drop cap letters, and modify it to have a line height of 1.2, then change the margins so placement and text flow looks correct.

I'm paraphrasing from memory, but css for drop caps that render properly on Kindle will look something like this:

float: left;
font-size: 3em;
line-height: 1.2em;
margin-top: -0.3em;
margin-bottom: -0.3em;
margin-right: 0.05em;

Edit:

Also, here are some changes you can made to Calibre conversion settings so it changes almost nothing of the book format:

In Look and Feel, check "Disable Font size Rescalling"
In Page Setup tab, change Output Profile to "Tablet"
In Structure Detection Tab: Change Chapter Mark to "None"
Change Insert Page Breaks Before to "/", (without the quotes.)
Heuristic Processing Tab, unchech "Enable Heuristic Processing"

The one big caveat: some books specify theit fontsizes with generic keywoards (small, medium, large.)... With font scaling disabled, Calibre will mistreat those badly, (changing them to fixed point sizes, very bad.)... you will usually know this if previewing the converted books and the font sizes have all become tiny. In that case, you will either have to enable font size re-scalling, or change those font sizes in the source epub manually.
In the case of enabling Font-size scaling, I prefer to use this font-size key,, It reduces the shrinkage of smaller text: Base font size "12 pt" Font Size Key: "10.5, 11.0, 11.5, 12.0, 13.5, 17.0, 20.0, 22.0, 24.0"