The reason it's not formatting is the file is not an eReader PDB. It is a PalmDoc PDB. I need to see the file to verify this. PalmDoc PDB files do not support any kind of formatting. The formatting you're seeing in the eReader viewer is being added by the eReader viewer itself. It is not part of the file. Sadly calibre does not add formatting it just transforms existing formatting. With these files your best option is to use something like book design, sigil or convert to TXT and use markdown to add formatting.
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