My favorite category of lore would be the Machinist University ones. I enjoy speculating on the ancient history of Kenshi, and those books are exactly that.
That said, my favourite book itself is not in that category. It would be the Suicide Note. It represents that not all of the racist zealots, burning woman and non-humans alive, are actually bad people. That not all of them believe what they are being made to do is right. This grey morality is present throughout Kenshi's factions, it's one of the things I like most about the game's lore. And this note is one of the best examples of it. So it earns its spot as my favourite.