The image viewer can be used when reading a kepub. Double tap on the image and it will open. This works for both purchased and sideloaded kepubs.
I haven't had the problem with missing highlights. But, I don't read enough books that have images to test them disappearing when opening the image viewer. I'll try when I find one.
For performance, I haven't used any sort of Kindle enough to get an idea of the relative performance. But, I would recommend updating to the latest firmware which is 4.7.10413. There have been performance improvements in several area since the firmware you are using.
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