Short version is that Kobo is delivering the Overdrive borrowed books on the KA1 via their own servers as kepubs rather than via Overdrives servers as an epub. Therefore, if Kobo doesn't have the exact same version of the book for sale it's not available for direct download on the KA1. All Overdrive books are available on the KA1, but if Kobo doesn't have it you have to do the normal download via ADE and put it onto the device via USB (rather than directly downloading it).
Whether doing it this way was a technical decision, financial decision, marketing decision or a combination of these, who knows.
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