I had a look inside of a Kepub. It has an unencrypted epub shell, but each of the chapter html/xhtml files is encrypted.
For DRMless Kepubs, Kobo has very nicely loaded some as sample books in the upgrade to 2.0.0.
In the .Kobo\kepub directory, 1a7e9e17-6248-459c-a1a0-1458deaa7676 is Mission Fox, a Kepub without DRM. Just append a .zip to the filename and it will unzip just like an epub.
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