That sounds like the kepub transformation wasn't done correctly. The way the locations are recorded for the annotations in kepubs use the spans that should be added by the extended driver. If there is a problem with that, then the annotations can be recorded but, the device will not display them properly as they cannot find the location in the book. The annotations function in the Kobo Utilities will still work, as it looks at the database entry and doesn't use the stored location for anything.
Having said that, I am very surprised by this. I have been playing quite a lot with annotations in the last few weeks, with no issues. This is for epubs, purchases kepubs, books converted to kepubs and books sent to the device using the extended driver.
I think to do any more, I need to see some examples of the books. I'd like to see the epubs before the send to the device and the kepub from the device. If they are books you can legally share (no copyright issues), post them here. If they can't be posted, you can use the ScrambleBook plugin to produce a version that can be posted. Or, upload them somewhere and PM me a link to the books to download. Or, use a book from the MobileRead library and see if the problem can be reproduced. Then we can safely share both versions here.
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