Hi Trent,
Yes use Chapters to separate your video into sections. In the Chapter room you can correspond to chapter with the time where each section of the video begins. And Yes you can edit it all in one timeline. You'll see the chapter markers in the timeline as a guide.
When you go to create your disc, each chapter will be displayed separately as thumbnails by default that will be clickable chapters (like selecting scenes on a DVD).
For fade in and out from black, use the "Fade" transition on either end of the video clip. If you want to use the color black to fade in and out too, use just insert a color board on the timeline. To find a color board, select the drop-down in the Media Room and select Color Boards. Just insert a black color board like it is a normal video...and customize it to whatever duration you want it to be fo your fade.
Hope that helps.
Dave