frabjous - "Surely the fact that they don't have to pay anyone for the software isn't going to be a turn-off for reader makers, it's going to be an attraction."
Uh. Have you never worked with a large company* on software projects, right? If you haven't, take it from me: No, they often think value is something you have to pay for. Also, legal departments are paid to be paranoid about these things, and it's a valid issue in this case.
(*large enough to have non-technical managers)
There also seems to be no reason why you'd need to embed TeX itself, as I've said before - it can output PDF's, which can allready be read. And there are still issues with reflow on TeX-created PDF's, which would be no different if you ran a TeX rendering engine directly.
ePuB has some major advantages, which are only very partially related to the fact they're XHTML - it's a standard. It's aimed directly at a reflow text standard, and will improve over time. You don't need to make the assumptions and guesses you would with a cut-down TeX renderer.
More, no, a reader page is far, far closer to a web page - it does not need to have a fixed aspect regardless of the user's wishes. The user cand and will change things like font size, and expect the text to be readable - and the text has to be readable on multiple devices, it's not laid down in a set size...
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