I am currently working on creating a book for publishing, and layout is a beast.

I usually just create the entire page in an image-editing software and print from there, but I don't think that is how a book should be done.

Can a book be designed and laid out in a way other than image-only, should I use a word-type editor, or is there something better to use that I don't know about?

The best software is probably Quark or InDesign (adobe). They are ideal for creating a multi-page document and then exporting it ready for print. Also they give a lot more options to work on the typography within your document. Have a look online for details of what the packages have to offer.