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I have spent the whole afternoon trying out iBooks Author and I agree with you. It can only be used to create highly-formatted books that can only be viewed on iBooks 2.0 on an iPad running iOS 5. You can't use it to make books that can be read on iPhone, iPod touch, or any older device with iOS 4.2.1. You cannot output a formatted iBooks Author document in anything of any use other than this new proprietary book format.
When I say "highly-formatted", I mean that you can create books with very elaborate paragraph and character styles. The resulting book lacks the capability of letting the user select their own font size, font or theme. You cannot enable the capability for the user to adjust the font size or font or theme, even if you want to!
iBooks Author has many wonderful things going for it in producing very elaborate books with video, interactive elements, audio, animations, illustrations and photographs, charts and tables. But it is not much use for creating a basic ebook and it doesn't accept or output ePub.
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