Both LIT and MobiPocket are based on the Open E-Book (OEB) standard, and should be equally good if created properly. It's the fact that both formats DO use the same underlying standard which makes it so easy to convert from LIT to Mobi with no loss of formatting.
Older versions of the Mobi file format had severe restrictions on image size, etc, but that's no longer true of the current version of MobiPocket Creator. There's no reason that a LIT book should be any "better" than a Mobi book.
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