In my post-processing chain, I work with TEI, and can just as easily generate the (monolithic) HTML and the ePub version from the same source, using the much better encoded knowledge of the high-level structure of a text that TEI offers me. Unfortunately, my better ePub's are not accepted, and instead, users get the inferior versions epubmaker spits out. This is frustration, and I am actually toying with the idea of getting my better ePubs on my own site instead.
We agree that PG ought to accepting ePUB as a submission format. We also agree that it is desirable to be able to produce separate ePUB for the newer ereader devices (ePUB and Mobi8) and for dumbed-down versions for historic devices (Mobi7 or earlier). It is also quite possible to merge these two ePUBs into one using the already-defined @media queries, if that is desired -- PG has no need to invent their own incompatible @media queries. We also agree that is would be desirable to set up a separate ePUB distribution site, if PG is not interested in doing this. This also begs the question that if PG is willing to accept TEI, why are they not willing to use your superior sausage-making chain?