It depends on your exact role in the book making industry …
- Are you the writer?
- Are you the publisher?
- Are you 'just the technician'? ;)
Countdown:
Ad 3: That's me. I get a list of phrases (names, or individual words, or “the deconstruction of the Self in the Romantic Era”) and someone Up There says, “hey, I've heard you can make an index of these. Please do so, a.s.a.p.”. Only thing I can do is run a script that looks up each of the words in my ID file and adds an index entry for them. I recently got a comment “People with the same surname are concatenated into one entry. Also, the pages where they weren't mentioned by name are missing.” … 'Nuff said.
Ad 2: Erm. See above? Publishers seem convinced 'an' index — any one — is better than none. I tend to disagree, because …
Ad 1: Creating an Index is a skill. You definitely don't want a dumb 'list of words'. Proper indices contain 'see under' and 'see also' references; different word stems are concatenated into a single entry (where applicable). Names are in full, and appear as separate entries: “Thatcher, Margaret Hilda (British Prime Minister, 1979-1990) / Thatcher, Margaret (fictional character) / thatcher (occupation)”. If it's likely people would look up the 'wrong' word, synonyms ought to redirect them: “profession, see occupation”.
I usually state it's the author's responsibility to create an index, because s/he knows exactly what the book is about, what terminology is used, and where people may be looking for in an index. But Indexing is also a full-time occupation; there are people who are amazingly adept at it, even for works they didn't write!
Only after taking this into consideration, you should tackle the technologicalities, such as: how to properly enter an index entry into ID, how to add sub-topics and cross-references, how to edit existing entries … whilst keeping in mind all ID can do is create the “dumb” index! A Good index needs quite some additional work after that.