I found a script that can turn Gutenberg HTML files into well-formed BBeB (.lrf) files suitable for the Sony PRS-500 and PRS-505 reader devices (and hopefully retaining the images and chapter bookmarks). So I automated it to pull in all the books I could, cleaned them up a little, removed the magazines, and added a sprinkling of Creative Commons SF authors, and here we are. Some 7.5 Gb of books.
Since this was an automated process I am sure there are mistakes, omissions, and malformatted files, but the files I have spot-checked looked fine. It also didn\'t cost me a lot of time :)
http://www.gutenberg.org
http://www.mobileread.com/forums/showthread.php?t=8532
All the books in this torrent are legal to download as the copyright has expired, they were expressly put in the public domain, or they are under a CC or similar license.