Ok... The OnDevice ONLY shows up for books that are listed in the Kobo database; this database is ONLY updated after the device is disconnected and the Kobo displays the message "scaning for new content".
If it does perform a scan and you still don't see books listed on the next connection, this is possibly an indication that the databse on the Kobo is corrupted. This can be detected via (among other things) using the Kobo Utilities plugin to calibre and doing a database scan.
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