I manually edit mine with the use of a few "templates" I've come up with and a checklist. Sad but true.
First I clean up the formatting of whatever source/text my wife gives me and replace any special characters with their html equivalent then I copy and paste that whole thing into my html template which I then run through calibre to create epub/mobi. (I do tweak a few of the settings in calibre fore each format as well)
Smashwords starts as a nuked text file and then I run it through my basic formatting.
Of course now you have me considering creating some macros to simplify everything.
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