I can't imagine doing it any other way than as a single image, but then my formatting goals have never been ambitious -- and that by design!
The one time that I found LITB to be incompatible with what I wanted to do was in the use of 20 percent mug shots with text that flowed around the image. KF7 nor Look Inside won't play that game. I didn't mind how the text would look in the older Kindles, but I wanted the Look Inside sample to be reasonably close to what the customer would receive in the vast majority of cases. (After all, if one owns a Kindle or Kindle2 or DX, one is accustomed to the occasional odd presentation of images.) So I revised the first two such mug shots so that the image stood above the first line of text. Not great, but a fair compromise.
Similarly, I size any image intended to be small (those mug shots, plus my publisher colophon) so that they will not blow up to full screen, which is what KF7 tries to do. I can't remember the size of the mug shots, but the colophon is 100 pixels square. It looks okay on every device.
The better way to do this, of course, is to use media calls, but that again is beyond my ambition. I want my epubs to be lightweight and to work reasonably well on every conceivable device. I don't embed fonts or use drop-caps or even build a "mobi" version especially for Kindle.
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