Brittneysahin (below) got it right (unless I am misreading again :-))!
Here is the text:
“But if you choose the 70% Royalty Option, you must further set and adjust your List Price so that it is at least 20% below the list price in any sales channel for any physical edition of the Digital Book.”
Obviously the operative word here is “physical” edition. In other words, a book can be priced the SAME as a DIGITAL edition at any other sales channel. The 20% reduction is only necessary if you have a print edition (I assume this includes POD editions but that is not clear).
In my defense for missing this word, I was taking in a lot of information at once and was probably not attuned to the idea of a physical versus digital edition, since “physical” versions of my books are out of print. Of course, they’re being sold by used book dealers at all sorts of prices, but presumably this is not relevant since I earn nothing from these used book sales and have no control over them.
If you’re tempted to buy a copy of the old paperbacks for like $0.01, or some such price, let me know and I’ll send you a Smashwords coupon for a cheaper (yes!) edition. Both books have been revised, Blood Lies a fair amount.
Thanks so much to Brittneysahin and others for input on this. If anyone gets any new information via direct communication with Amazon, thanks in advance for letting us all know. And I’m going to change my royalty rate to 70%.