I have an epub for a hundred-year-old book with the illustrations from the original missing, and no links from TOC to the appropriate places. Wanting to correct that, I tried to open it from iBooks Author 2.2. The pub is grayed out in the Open dialogue. If I select "all files," it is un-grayed, but either way, it cannot be selected.
I don't think the problem is DRM, because the file came from project Gutenberg. Also, Calibre allows me to convert to PDF and back, but the result still cannot be loaded. Talking New Media claims that this version of iBooks Author adds the ability to open these files.
The "advanced" option to "add to ibooks as proof" also won't open it. Experimenting, I created new epubs from several PDF originals with calibre, and it won't open those either.
Best Answer
iBooks Author only opens iBooks Author projects (.ibooks). You need to create a new iBooks Author file and import the ePub into it. Go to New → New from ePub file….