Ebooks

I use a combination of calibre (to convert) and Sigil (to format) epubs.

Like the_other_sandy said, it's buggy, but it works (and it's free!). It also has an option to split up the file into chapters since you said you want to chop it up. Be careful when doing that - the undo button doesn't work on chapter splits so you have to know exactly where you want to put them. It's a real hassle to try and splice back together what you didn't want separated.