I use "CHMate" to read CHM files, and I'm pretty happy with it (opens books quickly, easy to use). You can download a free app first to see how you like it (it will only allow you to add one book). You transfer the books to it via iTunes.
For PDF files, I use "GoodReader", for me it's the best (easy to use, can download books off the cloud) and now it allows you to annotate and highlight. It also has a free app that you can use to test how you like it.
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