If you want it to work like PDF, why don't you just use PDF? That can do everything CHM can do, and is a whole lot less ugly. CHM is pretty awful. And you are a lot more likely to have viewer issues with your customers with CHM than with PDF. If that isn't acceptable for some reason, HTML is probably the next choice.
What "interactivity beyond linking" are you looking for? (Other than searching.)
Basically the user must be able to have different views of the same source material. In practice, based on some checkboxes, the user is shown more or less content - some content is expanded or collapsed for fast reading. Also, it would be nice with some basic visual effects (e.g. color animations) when the user hovers over links and clicks links. Also, individual pages can be arbitrarily long as with regular HTML pages.
But actually, even if PDF can't do interactive visual effects, it might just be good enough to seriously consider.