Just as a matter of experiment, I took a book in ePub format, converted first into Formatted Note, then the Formatted Note into MD, and I got garbage in text mode but real good text in preview mode. Check first capture. Second one is the Formatted Note source in BBEdit.
Actually it’s not garbage but encoded image data. A future release might and probably should improve the handling of the editor in this case.
Forgot that the Formatted Note embeds the images
(Then I’m impressed that you could embed an image inside a MD file!!)
Disabling line wrapping (see Format menu) might be an option as BBEdit doesn’t do this either on the screenshot.
Will try when at home.
BTW, this was a matter of experiment, not important if the conversion from FN to MD encodes or extracts and links the image.
Converting RTFD to Markdown also encodes images, by the way.
As you can embed any html into MD… I posted a script some time ago that added quick view thumbnails to MD files.