I'm going to take a contrarian position on this post. Please do not interpret that to mean that I don't respect Keith Fahlgren or anyone else at ThreePress Consulting.
There's an interesting post over at the ThreePress Consulting blog in whch Keith describes a better way to develop ePub for iBooks.If you want to get your content into the iBookstore, this is worth a read.
The key to this hack technique is the free (as in beer) iPhone Explorer application, which exposes the contents of your iPad like a USB drive (including resources for Apps). It has both a Mac and Windows version, but I’ve only tested these instructions on a Mac. Before starting, connect your iPad to your computer and iTunes. You should not be using automatic syncing (“Sync Books” is not checked).
But I can't help wonder why anyone would put work into the formatting the ebook for a minority platform. That is exactly what iBooks is. Heck, it's not even the only Epub reader on iOS; most of the others use Adobe's code.
And if you're thinking about the 5m plus iPads, then I'd like to point out the X millions of PCs that can run Adobe DE. Unless you can tell me how many instances of iBooks are actually in use the 5m figure is irrelevant. And besides, I will bet that more people use the Kindle iPad app that iBooks.
So what do I use? Well, back when I actively made ebooks (last year) I used Mobipocket Creator. <pause to enjoy gasps of outrage> I was making ebooks for my own enjoyment, and at the time I only had devices that supported Mobipocket. But other than that I used the tweak, view, tweak, view method described in the post above.