OK, for what it's worth.  Here's a simple python script that takes a directory with an OEB book (converted from .lit, hint-hint 

) and supposedly creates a .epub file. (BTW, .py does not seem a valid extension for this forum... 

)
My feeling is that .lit files are not necessarily conformant to OEBPS 1.2, and that could be a problem...  Another possibility is that DE expects all those nice files with TOC and page format... I agree one more time with wallcraft about reading sofware as well as various sources for e-books in this format...