Kovid,
I've just finished doing a bit more testing. I think maybe the problem is with the png image file itself. In the absence of being able to think of anything else to do, I converted the file to jpg. I left it at its full size and re-imported to calibre. After conversion and sending to PRS-505. The image displays OK.
I'm sorry for any inconvenience. I don't think it's worth wasting anymore of your time. I'll open a ticket if I keep getting similar problems in the future.
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