I think you will find that it does this even if the labels are all in upper case and it is just lowercasing all but the first letter of a word. I added an --lower-case option some time back if you want to see if your etrex can really display lowercase.
Not impoirtant, only for clarification: Yes, I know the fact that the names in my etrex are saved in uppercase style and are converted to lowercase in some, but not all situations. On the map the street names gets always displayed in uppercase. If I use your --lower-case switch, then the names are stored in mixed style in the img. Now it seems that the etrex cannot display the lowercase letters but only the uppercase ones at the beginning of a word. The lowercase letters get drawn as a dot. But if the label gets orientated exactly horizontaly, as this is the case for e.g. city names or POIs then it can display even lowercase letters! So I assume the etrex cannot display rotated lowercase letters. Maybe there could be something achieved with a typ file? Regards, Johann