For indents, I prefer 1.1em. 5% as used in a lot of Mobipocket and MS Reader is just too much (IMHO).
For paragraphs that use a later first letter, I use a line-height of 0 in the CSS style that makes the first letter larger. That brings the line down to a normal line-hight and doesn't look odd. Why the publishers don't do this, I have no idea.
One thing I think would be very nice is to have a config file for ebook-convert so any options you want to override from default goes into the config file and that value gets used unless you specify the command on the command line to override what's in the config file or the default.
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