OpenInkPot (FBReader) does not support LIT directly, but if you use ConvertLIT to "explode" the LIT to an OEB (HTML, images and a .opf file), make a ZIP of these files and rename it .oebzip then FBReader works very well. This is the format I use for almost all my ebooks. Note that you can try FBReader on any Desktop PC. Under OpenInkPot, the number of customization options is reduced but the display engine is exactly the same as the Desktop version.
The standard Hanlin firmware is supposed to support DRM-free LIT but when I tried it on a Baen ebook this did not work well (crashing the device at one point). The best options are to use Calibre (or ConvertLIT and Windows MobiPocket Creator) to convert to MOBI, or Book Designer to convert to FB2. OpenInkPot also reads DRM-free MOBI and FB2 (FB2 can optionally be read using Cool Reader 3, just like the standard Hanlin firmware, if you want).
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