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Wow, okay...
Basic needs: First rule, most of the formats should allow the user to override the font choices and sizes. With that in mind, my first choice would be HTML with embedded images, with RTF and TXT also quite usable. Given the graphics support, it should also have 16 grey levels.
Less necessary, but highly desirable: I would want a good compressed format that would allow you to combine several web pages into a single file -- something like Plucker or iSilo. Likewise, besides basic graphics support (JPG and PNG), it should be able to handle archives, such as CBR and CBZ.
Finally, I am not convinced that DRM is not an option -- if this thing is already running Linux, and Pepper already has Mobipocket running on Linux for the PepperPad, that could open a lot options for some potential buyers.
Jack
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