Jpeg is perfectly fine. You might consider Tiff if you're going to do lots of editing with traditional apps like Photoshop, but iPhoto's lossless editing feature makes that unnecessary. As to when to crop, really that's done to what works best for you. Personally, I would crop first. You might find it easier to do it later. A little trial and error is the way forward.
What size/size ratio are the photos you're scanning, 4x6, 5x7? iPhoto books use a 4:3 size ratio for it's frames on its pages.
If the size ratio of the photos are different they will be automatically sized/cropped when put into a frame.
However, many themes allow you to Control-click on the photo in the frame and fit the photo to the frame. That will put some buffer space around the photo in the frame.
So you can first see if your scanned image fits OK and, if not, crop in iPhoto to 4:3 as TD suggested.
I have a new problem! I will admit to being a complete beginner in the creation of books from iPhoto. I have done all my scanning, saved all jpegs in a dropbox account so that other family members could also see them. Then I importend my 'shortlist' into iPhoto. I then used the 'last import' file and clicked on 'Create' to bring the photos into a book project. At this point the chronological order that I had put the photos in disappeared and they are now shown in an apparently random order. Should I have imported them in some other way so that the chronological order (as shown in the assigned filenames) is preserved?
Photos are arranged in the book in absolute chronlogical order. Evidently your files are not in chronological order because scanned images take on the scan date whereas photos from a digital camea have the date the photo was taken.
To get your photos into a book in a specific order here's what you need to do before creating the book:
1 - assemble the photos in an album and arrange in the order you need.
2 - select all the photos and use the Photos ➙ Batch Change ➙ Date to Date menu option to give them all the same date with a 1 minute separation between photos.
Do not modify the original files!
3 - select the photos and create your book. The order of the photos in the book will be the same as was in the album.