On the iphone bookshelf forums, the author of the software (pendor) said that most non-mobipocket formats are converted to another format, but I can't remember which one (plucker?), so there's another layer of conversion at work here.
To solve some of your character issues, it may help to convert the characters to UTF-8 before putting them on the server:
http://www.iphonebookshelf.com/forum...t=convert#p165
Unfortunately, I don't know how to do that...
