I used Calibre to send books to my Reader for the first time last night. I have always used the SD card for books, leaving the plastic "space-holder" for the MemoryStick in place (to keep out dust).
But, for me anyway, Calibre wouldn't recognize the SD card if I didn't remove the fake MemoryStick first. It was as if it had to be one or the other, not both.
Don't know if it's the same problem - but you could give that a try...
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