Creating CHM

Today I were investigating how to create CHM help.

There is original Microsoft "compiler" - hhc.exe and simple IDE - HTML Help Workshop. Using this IDE and compiler you can do all the CHM-related affairs but it is not very convenient.

I have looked to some shareware utils - there 2 approaches to create CHM:
1) Create all the content using this util and then compile it to CHM. Very ugly and non-professional approach (not flexible + I had problems with Russian encodings in almost every tool I tried)
2) Create all the content (HTML, CSS and images) using your favorite tools and then feed the directory containing your prepared content to the util, make some customizations, save project for later usage and then compile it to CHM. Personally I found the second approach much more useful and professional. The most adequate tool for this I have found at the moment is Pocket CHM 4.3.