hi fbrII, thanks so much for wanting to contribute ! that's really great.
to answer some of your questions, a good place to get content is project gutenberg. you can be sure that anything you find there is definitely in the public domain in the US. likewise, there is a PG Canada and Australia. check to see whether the title that interests you is already available here ; if it's not, convert away ! if it is, take a look at it and see whether you feel like making different formatting choices in a new edition (it's up to you).
as for tools, i recommend you try out the new epub editor, sigil, which has its own forum here. if you know xhtml / css that will definitely help you, but it's not an obligation ; sigil has a wysiwyg interface.
maybe the *best* place to get started is by taking a look at some of the books already available here ; we have some really beautiful editions by uploaders like jellby, patricia, mtravellerh, and lots of others. take a look at how they present the text (special styles for titles and chapter headings, page breaks for each new chapter, etc.) and try out the different styles on a test document for yourself. then dive right in with a book you'd like to read and make it look gorgeous.
if you get stuck, just ask for help. mtravellerh, i believe, has some templates in fact, he might be able to give you some useful tips.