If I drop the cover into the source images before doing the conversion, and also use cbz instead of epub; I'm having good results. Had to do some legwork to convert and reimport several titles in my calibre library, but The added bonus is that I've found that switching pages with CBZ files in koreader is much faster than epub files for the same source material.
So no, I still don't know what is causing calibre embedded images on epub files to not work with koreader; but am using an effective workaround.
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