Weird. It was generated using InDesign (though I've now learned that opening the .epub in Calibre's ebook-reader will insert a bookmarks file into the zip).
I then used Kindlegen to turn that epub into mobi for sale on Amazon, and Calibre to create the mobi I offer elsewhere. No one has told me they had any trouble opening files and I've viewed them using assorted programs.
(a book really works best with the whole thing in one file, because that usually minimizes editorial inconsistencies while you're writing, and makes it easier to check later. it also dampens file-clutter considerably, which is good.)
I find it easier to break things out into chapter files. Turning the chapters into a Web site even if only hosted locally) makes it easy to navigate through the whole thing. It works for me.