Update 8/30/12: For those interested in simply writing an ePub file from scratch in a clean editor, Check out the free project Sigil. While it creates a fantastic ePub file, the Table of Contents does not carry over when Amazon converts it. However, Sigil simply creates HTML and this tutorial will give you some additional information regarding how to manually create a Kindle ready version.
I recently wrote up a case study for the audience at NovelRank.com on converting blog posts into an ePub e-book, and the experience helped me immensely. It was a bit of refresher course, as I had gone through the process to create my second book, 50 Conversation Starters for the Modern Age. Once it was built using the sample HTML code below, I used a fantastic and free program called Calibre, which is available for all operating systems, to convert the file to both ePub and Mobi (Kindle) formats. Finally, for editing the HTML, I used Notepad++, especially for its ability to do Find and Replace based upon Regular Expressions.