I found the 0kb thing on several Manybooks LRFs myself, but the ones with content have worked fine for me. I'm not sure I've settled down on a method yet, but I'm thinking I'll probably go LRF unless the file's empty, and RTF in that case.
I wonder if Manybooks has maybe not converted all their texts to LRF, since the Librie didn't do all that great. Maybe they'll convert more after the Reader's been out a while (assuming it does well, which seems reasonably likely), and they'll rename the format to Sony Reader.