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I have noticed when trying to read certain pdfs on my iPhone 4 that the text wrap fails on certain images leaving the image overlapping and the text impossible to read. It may also have to do with background images not being flattened. This happens on some pdfs, but not others.
This happens in two iPhone applications, both Air Sharing and iBooks.
It may have something to do with the mobile pdf reader, but it does seem that some pdfs overcome this limitation.
Do you know of a fix? In any case, can this be looked into for future releases?