Welcome to MobileRead, John Wheater!
Easy on the volume, eh? My virtual ears are ringing!
I'd guess that it's not that Sony
can't do better, but rather that they decided not to for whatever reason. I could guess that they decided that their software was for managing the content in the sense of moving it about, as opposed to editing, so they just didn't include support for that. But it would be a guess.
As to the PDF thing, yeah, we've kicked that around quite a bit, and you'll find a number of folks around here who'd agree with your take that it was "falsely offered," but most of us agree that they only said that the Reader would open PDF's without converting them to another format, not that they claimed a page size roughly 2.5 times the size of the Reader's display would be legible on that display.
I'm guessing that you may not have known about that limitation before you got a Reader?
I'm sorry for that, I know it's extremely frustrating, especially as a surprise. That's one of the reasons we talk about the limitations here so much -- we want folks to know enough about these devices so that they get what works for them, and don't get what won't.
The good news on that front is that Sony has signed on to support Adobe's Digital Editions, so there's hope that the situation might improve. Doesn't help today, but it's still a good sign.