"Converting" the submission using extra materials that you have on your hard drive at home but which are not part of the submission is not what I mean by converting it.
Again, you assume that when I submit a book I have these yummy high-rez files just sitting there which somehow I am keeping you from having access to. In general, I do not have such high-rez files. In some cases, but not in all cases, I could take the extra time and effort to scan, process, clean, correct, compress, etc. a separate set of high-rez image image files for submission. I probably would be willing to do so, when and if possible, if PG were to set up an intelligent way of actually using those files. Again, I would probably suggest that PG could make the submission of HTML separate from the submission of EPUB files, and the HTML could be high-rez for people who want to read HTML on big machines, and the EPUB could then be appropriately sized-down in all regards including images to make small machines happy -- and modern MOBI would flow more or less directly from the EPUB submissions. If the HTML were submitted separately from the EPUB, rather than the current PG auto-gin approach, then it might be worth the extra effort, because one could submit two high quality not-compromised efforts, rather than having to submit one by-definition compromised effort. [Or at least less-compromised efforts because again any flavor of HTML including EPUB is less than ideal for doing "real" books.]