My Kobo had not been displaying the proper format in my EPUB books. There were no paragraph indents, no bold text, no italics, etc. The paragraphs had blank lines between them, which just looked weird. I had no idea what the problem was, and my first e-mail to tech support went unanswered. When I called the store (Indigo), I was told that there is no provision for italics or formatting.
As I found out this afternoon, that is, quite simply, wrong.
My second e-mail to tech support was answered today, and the problem has been resolved.
For whatever reason, you can't download your Kobo books from the Kobo store onto your Kobo eReader using the Kobo software. You have to use Adobe Digital Editions to download the books onto your Kobo eReader, or you'll lose all the formatting and other goodies that come with the EPUB format. I just tried this with my current read, The Magic Thief. Before, the book had no paragraph indents, no italics, and no pictures (the map at the beginning was just a blank page that said "MAP"... how helpful). Now, after downloading the book with ADE, I've got all of those goodies, along with illustrations interspersed throughout the text. I'm almost giddy. I thought that PDFs (which don't fit that well on the screen) were the only way to have pictures on the Kobo. It turns out that the EPUB format supports pictures, too.
So the problem is fixed. But I am somewhat confused. Why make people download your software if it's only going to mess up the formatting of the books that you are selling? Why not tell people how to get the optimal experience out of their e-reader? This seems like a fairly big oversight on the part of the company, and a bad marketing boo-boo. I was actually considering trying to get myself a Nook because I was annoyed by this formatting issue. Luckily, I won't have to.
Kobo folks: Either fix the problem with your software or print this important piece of information in the QuickStart Guide. And educate the people who are selling the product in their stores (because they obviously don't know about this issue)! The information may be buried somewhere in the instruction manual on the e-book itself... but since there's no search function on this e-reader, it's not realistic to expect people to read the whole thing to solve one small problem!