I don't publish "all" of the content that's going in the book. I've read How to Blog a Book, by Nina Amir, www.howtoblogabook.com, and she explains how you publish your stories on your blog and use that as the basis for your final manuscript, Since I've posted most of my chapters, I've already changed them around as I've felt the need in my manuscript in Scrivener.
As soon as I started blogging chapters on my blog (and sometimes I cut the chapters down into sub-chapters, or even "scenes"), I started really rolling fast on the book. It may not be for every writer of course. It fits me to a T though. An added plus, is that my cousins can read the stories, and a time or two one of them will give me more facts. They've started sending old photos to me as well. And I've gained new relatives! They found my blog.
As far as publishers not picking up a book that's been on the internet, there are lots of misconceptions there. I'm self-publishing, so I don't really care, but there have been books that were blogged and a publisher saw it and wanted it. The How to Blog a Book book also covers this.
Lynn actually got me started blogging my book when she started the educational series on the site, and I jumped right in. I know I wouldn't be as far as I am right now if I hadn't done this. Hope this helps explain a little bit.