Use Word...
...or if you have some strange issues with Microsoft, or don't have access to a native version of Word, Open Office will work. Word is actually quite good at this sort of stuff, plus this will give you the most flexibility in the long run (at least as far as publishers go). The exception is if you are self publishing or handling copy edit/tech edit/ and layout yourself. See the problem with other tools is that you will find that most production people (including copy/development/ and many tech editors) are trained to use Word, and using something else will a create huge workflow issues and may require some sacrifices in the production process, resulting in an overall negative effect on both the timeliness, editorial effectiveness, and cost of producing your book.
Now many publishers are at least considering the use of docbook or a similar XML type format (since often most books end up in XML for easy output to various print and online mediums), but for now it's just not an ideal format either since the tools haven't evolved to be that useable for many editors.
See the thing is, I assume you want a well trained copy editor and such, and many copy editors, are good at language, not technology, so they just don't work well with LyTeX or XML or whatever.
Now again... if you are self publishing, do whatever you want. Otherwise if you don't use Word (or something Word compatible) you will be limiting your publishing options significantly.
(BTW unless you are self publishing, InDesign is a terrible option... it's a layout program not a writing tool, and many publishers still use Quark, or some other layout tools.)