Hi elizmart,
You're not doing anything wrong. First you need to import your cds, then you can join the tracks into chapters.
Each cd you import will show up as a single line (group) in the Chapters window, with a grey triangle and little red bookmark on the left. If you click the triangle, it will open the group to show the tracks that were imported from that disc. Click the files you want to join, and hit the Join button. You can also drag files from one group to another.
Name your chapters either by double clicking the group and typing the new name, or by clicking "Show Details" near the bottom of the Chapters window, selecting the chapter group you want to rename and typing in the Name box.
You will also notice a little play button (when you Show Details). This is really handy for double checking you have the chapters in the right order before you build your book.
Hope this helps.