Technically, either option should work. Personally I also prefer to create the chapters in a separate namespace.
If the namespaces aren't appearing in the forum list, make sure the "Show Namespace in Forum Bits?" setting is set to "Yes". Also make sure the Display Order is not 0 for them or your wiki section.
As for stopping them from appearing in What's New, there's not really an option to do this at the current time (unless you want to disable search entirely for your Books). If you know a little PHP, you can add the book forums to the search's exclusion list.