To get a good sense of how TeX, LaTeX, and friends can help you separate broad formatting decisions from content for large and complex documents (such as books), I would recommend you first read the document A Few Notes on Book Design by Peter Wilson. The author is also the creator of the memoir document class for LaTeX, which may be of use to your project. The "Notes on Book Design" document will help you make some basic decisions regarding the title page and other front matter, the layout of pages at the start and within the body of each chapter, ratios of text-width to text-height on the physical sheets of paper, the choice of header and footer lines (if any), the page numbering style, etc
Second, it appears to be the case (judging from your screenshot, at least) that there is a lot (over 1000 pages) of "ordinary text"; for this, you'll have to make basic decisions regarding the font size, linewidth, distance between successive lines, the amount that the first line of each paragraph should be indented by, etc. In addition, there seem to be about 700 cases of "verses" (each line to be set centered, correct?), most (or all?) of which are preceded by some text (of explanatory nature?) that would appear to have to be typeset fully justified. For these 700 cases, your main concerns should likely be (i) how to offset the special text/verse groups visually from the surrounding text? (vertical whitespace, left and right indentation, different font family, different font size, ...) and (ii) do you (or do you not) permit page breaks between the introductory part and the corresponding stanza?
In addition, you should probably plan ahead for such things as the creation of an index and instances of non-Sanskrit fonts -- most likely in the introduction and when creating references to the secondary literature (which font, font size, line width, line spacing, etc.)
These are but a few of the concerns, but probably among the major ones, you'll need to sort out before you spend significant time actually getting the document entered into an electronic format.
Addendum
- For Sanskrit fonts, you may already have some specific font(s) in mind. It may be useful to consult this webpage of the University of Chicago's South Asia Language Resource Center. Other people may have further suggestions for fonts that may be suitable for your project.
- To typeset a LaTeX document with fonts stored in .ttf (TrueType) and .otf (OpenType) format, it's necessary to use the
xetex "engine" (or the luatex engine) instead of the widely used pdftex engine. The change-over costs from pdflatex to xelatex are not that high, fortunately. From a user perspective, the main change is that one has to load the fontspec package (current version: 2.2a) and then use that package's \setmainfont and related commands to set up fonts. I suggest you study this package's manual carefully, esp section 10.18 on "OpenType scripts and languages." (Hopefully, other members of this group with more practical experience in this field will be able to provide further advice.)