Going from EPUB to KEPUB requires conversion (I believe KEPUB has XHTML directly embedded into it, right?). It's Kobo's proprietary format to "support" fast scrolling with preview, reading time estimates, etc.

Yes, Kobo can potentially read EPUBs natively, however the support is intentionally gimped to try and push you towards KEPUB/their own store.

Ah, I had not considered that the limitations of epubs were due to the device rather than the format. Having said that, Calibre does does the conversion on the fly when I upload my books, so I don't really experience any issues there