I would like to know the answer to this too!
Can Booksmart be used to make books that are not published with Blurb?
If somebody created a book using BookSmart downloaded from Blurb is it then illegal to publish the book using a publisher other than Blurb?
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It's not possible to open a BookSmart book file on any program besides BookSmart, so in a technical sense the answer is no.
Also, there is some Blurb-created content (such as the layouts in BookSmart) which remains property of Blurb. You can find additional details in our Terms and Conditions and the End User License Agreement.
However, your *own* content always remains yours, as it says in section 8.1. So in that sense, if you make a book with Blurb, there's nothing stopping you from taking your own words and your own images and later self-publishing them with a competitor (though why would you want to do that? ;-) ). Or, say, being picked up by a giant publishing house and becoming the next JK Rowling.
Michael/Blurb Customer Support