Hm I've never experienced this myself, usally the font decrease fixes any spacing issue. You might want to try LRF Conver and covert the text to RTF or an ePUB and see if you get better results.
Another thing if you use the lrf2lrf tool is try decreasing all the fonts and see if this fixes your problem (I RECOMMEND you try this on a copy LRF not your original file)
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