Hey HappyGiraffe. The first step is to create your e-book in html format. When you open up the html file in Notepad, then you can immediately see if there's any weird code or bugs flying around. If all you're getting is normal text with a few mark-up tags (h1, h2, em, strong) then all is good. See how your e-book renders in a web browser and make sure it does so to your satisfaction.
Once you've got your ideal html document, it's an easy road. When designing
Living It Savage, I initially used the free Calibre program to convert html to epub. Calibre is good in that it allows you to convert a variety of files, but it's options are limited and different formats turn out differently.
Converting html to epub using Calibre worked really well. Converting html to pdf using Calibre did not yield the same results. I used the
TotalHTMLConverter to convert html to pdf. To add a cover to my epub, I later scrapped the Calibre epub file and used the free Sigil epub editor. Using Sigil, I imported my html file, inserted a cover image and converted it to epub. Works like magic.