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Also I think you need to more clearly define what the use case is for this tool. Is it for authors who want to write books, or is it for proofreaders who want to touch up and convert existing books.
If the former, far more important that the features you have outlined would be features to support actual writing, like for example, keeping notes associated with characters/places/events.
If the latter then all that's needed is a wrapper around any good html editor with a wyswyg mode.
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