@brewjono: Don't set the mobi output type to 'new' (in the output settings), neither the Touch nor the PaperWhite seem to like those (AFAICT, because they try to parse them as mobi7, which obviously fails
).
IIRC, it's not working terribly well on the K3 or K4 either.
If all your devices are up to date (3.4, 4.1, 5.1, 5.2/5.3), you can go AZW3 all the way. If you still care about your K2, mobi 'both' will probably be your best bet.