I've looked into it again, and Scratchmonkey doesn't have flows greater than 300KB - or I must be going a bit blind, what with all those years of reading in dimly lit rooms and all.
The biggest flow in there is main3.xml, weighing in at 269.6KB, which even if we assume the 300KB limit is counted the harddisk way (where they equal 1kb with 1000 bytes), would still not amount to more than 276.1kB. So it's a mystery to me why it doesn't load on the 505. I've noticed there are some special chars in there though, accents etc. - perhaps it's having trouble with those? Has anyone read epubs on their 505 that have accents? Do they display correctly?
Oh, and if you like Scratchmonkey, try Accelerando, also by Charles Stross. That was the last book I finished on my iLiad before it got nicked on the plane, right before I started reading Scratchmonkey. Made the loss somewhat more palpatable: at least I've read some damn good books on that thing before I lost it.
***UPDATE***
I just checked the files describing the chapters. There's something wrong there as well;a whole chapter isn't even referenced. But splitting chapter 2 - In The Duat (main3.xml) in two separate xml files does help. Now I can read the file on the 505.