No word by word read-aloud with iBooks Author, that is only possible using Apple Fixed-Layout format and .smil files.
See our http://itunes.apple.com/us/book/peter-rabbit-read-aloud-edition/id470612989?mt=1 1(free sample) as an example.
Not difficult, just tedious.
With IBA you can have audio on each page, but no word by word highlighting.
A mild workaround for this (with no word highlighting though) would be to insert a video of a still (page) with the text on it. To get your video, add a still image & VO your voice person reading the text in Final Cut, etc. Sorta what we are doing but we have characters reading the story in places so our videos are set into the page that sometimes contains the text, and sometimes instead of text.
The only way you can add read aloud to an ibook is by using easy epub code editor.
This app works on the ipad and is the ONLY app that can generate smil/xml code for read aloud. The only thing is that you cannot use it on anything but a raw epub file. You cannot use it with ibooks author or with any other file. Hope this helps.
MAKING A FIXED LAYOUT BOOK:
HOW TO PUT READ ALOUD INTO A FIXED LAYOUT BOOK (WITH CODE):
She is the only person right now who actually tells you step by step how to do it. I bought her book from Barns and Noble (but you have to order it because its a print on demand book). Its great and the only book I could find on the subject.
You will need an epub compatable text editor, get a little XML coding (not too much, its just a little you will need), an audio editor and microphone to record your narration, and patience.
Also, if you don't want to touch code at all, this site called Kitepress will do it for you. They even send it to itunes for you and put it on Amazon for you too and do a little promotion by putting your book under their publishing name so all books link to ones made using Kitepress. (Don't know if this is good or not but something to think about) But they take a percentage out of any of your profit when you sell it.
Liz Castro is the girl to talk to about read aloud so check her out first.