Marco Fioretti wrote a detailed article explaining how he used txt2tags, pdflatex and a home-made shell script to create a full PDF book. He took screenshots, showed live examples and even provided the code for his custom script. Nice work Marco!
Read the article at: http://freesoftware.zona-m.net/how-transform-almost-plain-ascii-text-lulu-ready-pdf-files-part-1