In regards to the command being grayed out … have you tried usual troubleshooting, such as rebuilding preferences? Experimenting with a simple one-page file? Logging in to your comp as a test user and trying from there?
All those "Export for" commands are actually scripts, which should be in your Adobe InDesign CS4 > Scripts folder. For example, there should be a subfolder in there named "XHTML for Digital Editions" which has a bunch of files and subfolders within it. Do those all look intact?
Re the images resizing, that's because Liz uses CSS to change the size of the images to a % of the screen width. I don't cover that in my title … but I did move it to the outline for an as-yet-to-be-recorded "Advanced EPUB formatting" course. ;-D Liz does cover using auto-resizing image CSS in her book, so grab that and take a look.
AM