My first impulse was to simply write it all in a plain text editor and deal with formatting and producing all the various file types later on. One file per chapter, etc. However, with Sigil I can deal with images and TOC from the very start, which might be an advantage.
It's interesting to read about how other's have approached this. It sounds like the toughest part of the job might very well be getting the various formats to look the way they should.
Though I've yet to actually publish physical books (only have proofs), I'm not willing to commit to using HTML as the base format. (Sounds like princexml might help though if you decide you want to go the physical route later).