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> the lock screen displays the book cover.

That's almost right. It should display the last page read!

The problem with that is (at least on e-ink displays) you wouldn't know if the device was on or off.

Showing the book cover solves that :)

Easy. It could be shown with a black border instead of a white one. Or any of innumerable other ways.

It can do both, it's up to you.