breaking up the chapters into a book file i think is the usual method, and while it's better
not to have spaces in filenames, it's not absolutely necessary (epubcheck will give you non-critical warnings rather than errors).
not sure about the other glitches you mention, but a great resource for creating epubs in InDesign is Liz Castro's http://www.pigsgourdsandwikis.com/
. her book 'epub straight to the point' is also a well referenced resource for Indd > epub.