I prefer to start with the RTF file from Baen. All I do with those is:
1. Download the RTF and the "large size" cover picture from Baen.
2. Open the RTF in BD.
3. Use "Element Browser" to make sure that nothing's been made into a title that shouldn't be one.
4. Select "Make Sony Reader Book", and drag the high-res cover picture onto the title image box.
5. Make the book.
That's it. Takes about 2 minutes, max, and gives you a nicely formatted LRF book.