Thanks for your comments and help so far!
It does seem like epub is the best way to go. Unfortunately, I can't afford to buy a copy of InDesign, which seems to be the way to have true control in designing the ebook (or at least one that's not just text, but both images and links). My publishing partner feels strongly about making our books pleasant to look at and easy to read -- and I just can't seem to figure out a way to do either of those things with the tools that are currently out there.
To be honest, I'm more than a little frustrated that the industry standard (epub) seems to be so difficult for a publisher to create
. If there's going to be an industry standard, I think we need a standard, user-friendly way to create the file. Calibre messes up the formatting of both images and paragraphs, and there's no affordable program to create an epub with original coding. Forget about reflowable text and images. The mobipocket creator does all of these things from a word file (which most of our authors using in writing their works) -- with no fuss or muss.
Then there's the problem of actually getting the file to open in ereader, stanza, or the kindle app. If the process is more than a few steps, I doubt we'll have many readers at all -- especially not anyone who's relatively new to ebooks.
Can we wonder why publishers are relying on the Kindle format so thoroughly or not offering ebooks at all? I've been researching and testing this for months -- even bought an iPod Touch just to test the books I'm creating. What a waste it's all been so far!