I'm sharing this info so other might benefit from my sturuggles for a solution. I am a self published author of a single book, selling paperback and ebook formats.
I have created an Fixed Layout EPUB with InDesign, that worked fine on most supporting devices.
And also, when I checked it on Kindle Previewer 3, to test it for MOBI compatibility, everything appeared Ok.
However, when I uploaded the EPUB to Amazon KDP, both the Online Previewer and Kindle Paperwhite devices showed the book with scrunched/overlapping text. (photo included) After two days of research I have discovered that the problem originated from the PS fonts (Post Script) embedded into the EPUB file by InDesign. (Checked the EPUB with an EPUB Validator named EPUBCHECK)
Apparently, some or most ebook readers, do not support PS fonts, so what happens is that the device replaces the fonts in the Fixed Layout MOBI (converted from the Fixed Layout EPUB) - with its own fonts, which do not fit the fixed proportions in the documents, thus resulting in overlapping text. .
What I did was open the EPUB with Sigil (EPUB Editor), went to the FONTS folder, and copied regular True Type fonts replacements into it (or Open Type if you wish), taken from the Windows\Fonts folder (Times New Roman in my case). I renamed each font I replaced with the same name of the original PS font InDesign had imbedded, so that I dont have to change the referring HTML code in the document (- the process was after I renamed each new font - I erased the original PS font)
Thats it, hope it help somebody in the future, Oshri