You have a couple options with reading CHM files (a type of eBook) on your Touch or your iPhone. The two I explored were converting the files or using an application from the app store on iTunes called iCHM.
Converting files provides many options some of which are free. I downloaded something from CNET but decided that iCHM was going to be easier so I decided to go that route.
After installing iCHM Lite I decided it was worth $6.99 to buy iCHM. iCHM allows you to open a web browser that will point to an iPhone or Touch on your local network and upload files to read. After uploading the files you have control over the files similar to eReader or Stanza. iCHM will allow you to sort through chapters fairly easily and read the content of your new eBooks.