It's possible, but its a really wonky way of working.
The text of the book is the big issue for me. If your client wants it searchable, and if you want an automated TOC, etc. The text needs to exist in IBA, not part of an image. It might not even pass Apple's iBook store requirements. So it may involve copying the text out of the PSD and into iBA so that the text actually exists. After all, Chapters and Sections need names.
The captions: These can be put into the image as a normal caption (so that the come up when the image goes fullscreen, and if you select 'free form', the can be moved about on the page.
The 'layout' PSDs. These can be thought of as 'background' images. You can export them as jpgs from PS (sizes/res previoulsy mentioned by Vinnyvg).
One thing to look at from the outset is this: interactive elements don't like to be overlapped. Each interactive element has a rectangular 'hit box' to trigger it. Overlapping these areas can provide sketchy results.
It's also good practice to ensure that interactive elements lie 40pts away from the edge of the page, as this can conflict with the 'page turn' action.
Interactive elements can be handled via the 'show object as thumbnail' option in Widget Inspector>Interaction.
If an item can have a thumbnail, then you can use any image you like as a placeholder – including a blank .png with nothing in it. This creates a transparent box that you can move over the top of the background image to fire up the approriate image. That can also be done with video, HTML widgets, etc. Caveat - I wouldn't use it on audio, you can stop it, but you can't pause or stop it.
It's not going to be easy, but what is? Take a small chunk and have a go at it. This should give you a much better idea of the problems you're going to come across.