A comment from Kovid Goyal of Calibre on yesterday’s blog post led me to do some experimenting this morning. I took the same files I used to demonstrate the squished line spacing and converted them into azw3 files. I loaded them onto my Kindle and the line spacing issue was no longer an issue.
So, if you are getting otherwise good results from Calibre and are comfortable with it and do not want to change, then from here on out, do NOT convert your files into MOBI format. Instead, convert them into AZW3 format.