I need to build a wysiwyg editor for a project I am working on and need some guidance. Some of my key points of confusion are the following:
iframe docs vs.
Don't, seriously don't.
What you are suggesting is a major undertaking. You really should be looking at TinyMCE, http://tinymce.moxiecode.com/, or CKEditor, http://ckeditor.com/. Getting what you are after is a massive amount of effort to get working for one version of one browser, to make it portable will take man-years of investment.
A better solution is to look at things like TinyMCE's plugins, http://tinymce.moxiecode.com/plugins.php. You can get your basics the basics (and portability for free) and concentrate on adding the specific value-add items you need to.