Well, I just completed a 708-page project in InDesign, about which you may have heard, and it went quite smoothly if I do say so myself.
The final product occupies 24 separate InDesign files, but even so making a book-wide TOC *and* a TOC for a single chapter was simplicity itself (understanding and properly using Paragraph Styles is absolutely essential). InDesign does handle cross-referencing [EDIT: well, bookmarks, which probably doesn't amount to the same thing now that I think of it... actual cross-referencing can be handled with a
plugin though, or the free version would be to do it manually with hyperlinks and a
script] and indexing, but I've never used those features really (indeed, I almost fell victim to the dreaded "page xx", but this was my fault, not InDesign's).
InDesign's built-in defaults handle typography just fine. I know a thing or two about typography myself, but I don't need to: the "set and forget" method in InDesign produces very attractive results with most fonts (especially with Adobe OpenType Pro fonts, some of which come bundled with it), IMO.
Another bonus of InDesign is that, if you spring for the Creative Suite, it comes bundled with Photoshop, Illustrator, and Acrobat Pro for not *much* more than buying InDesign alone. All three were invaluable during production of WOTBS.
I seem to recall reading somewhere that WOTC uses InDesign as well, FWIW.
Any modern layout software will give you a print-ready PDF (the format you will in all likelihood be handing off to your printer); you just need to decide what features are most important. Personally, I find that InDesign meets all my page layout needs.
EDIT: Here is Adobe's very own feature-comparison page:
http://www.adobe.com/uk/products/framemaker/comparison.html
FURTHER EDIT: I'll put it this way, though: I wouldn't want to author content in InDesign. The way I look at it (note that this is from somebody who's only toyed briefly with FrameMaker) FrameMaker is (among other things) the word processor Microsoft Word dreams of someday becoming: full of design and technical features that Word either can't touch, or tries but fails miserably to touch. InDesign, on the other hand, is the page layout software Microsoft Publisher dreams of someday becoming.
For WOTBS, all the text content was developed in Microsoft Word. You could do your writing in InDesign if you really wanted to, but it's more of a struggle (the "word processor" feature isn't WYSIWYG, for starters). But when I received a Word file, I always doctored it *in Word* until it was ready to be placed (Paragraph Styles, remember) because of InDesign's... quirks.
FURTHER FURTHER EDIT: You'll want to check out Scribus, as mentioned, as the price can't be beat. Other utilities with a lower price point than either FrameMaker or InDesign that get generally favorable reviews are Serif PagePlus X3 Publisher Professional and Microsoft Publisher.
I suggest getting your hands on Scribus and trial copies of each of the other programs, and then spending one or two days with each attempting basic layout tasks and just generally exploring your options (copying or redesigning pages you have access to is, as has been mentioned in another context, one good exercise). Page layout software works on a different paradigm from word processing software, so if you've never attempted anything like it before, there is a learning curve to page layout which can't really be shortcut... then you have to get into the different ways each program handles your needs.
If you haven't ventured into page design before, you might also want to read up on a few things... one good starting point is this:
http://desktoppub.about.com/od/desktoppublishing/u/Tasks_and_Techniques.htm
Anyhow, this is becoming a huge post, so I will close by saying good luck and I hope you find the solution that fits your budget and needs.
