From what I know, the story about the milk powder is true. At least I have heard that story from many many people here.
As there are so few cows here in Taiwan, milk is imported mainly from Australia. All foods have to stay in quarantine for at least 10 days, so since real milk would have gone bad after that time, they import milk powder and add water after the quarantine period.
This is the reason I still give formula to my kids now - if the milk isn't even fresh and "real", I might as well choose formula which is fortified with vitamins and all that stuff.
Btw, I have used High Quality Milk and also I Love Milk (the one with the cow on the label) to make yoghurt, which turned out well. That means that at least there are no antibiotics in the milk, otherwise you wouldn't be able to make yoghurt.
High Quality Milk is the most expensive and tastes best, I think I'd give this one to my kids if I wouldn't like to buy formula.