Unless it's changed, MS word cannot handle files large enough to cover a novel. Or even a novella for that matter. Consider that for even a novella, you're talking about probably at least 50k words covering about 100 pages and that for a novel you're probably talking about double that, or more.
It's just about inevitable that you're going to have to split it somehow, and chapters is probably the best way of splitting it.
Overall the answer depends a bit on what sort of writer you are, if you have an organized plot before you start, then you'll want to break the chapters according to the outline and you may even want to write them out of order. If you're more of a stream of consciousness writer, then you'd probably just break whenever it word processor calls uncle and leave the chapter breaks till editing later on.
The big thing that people don't usually talk much about is revision control. The Wiki suggestion below intrigues me a bit, I'll have to look into that.
I haven't spent much time with it, but yWriter is both free and gives a lot of help with things like keeping track of characters and any important items in the story. [link]
I'd like to do NANOWRIMO this year, but I'll likely not be able to with other commitments.
Given that my win98 computer with 128MB ram running can read hundred thousand+ word stories, I find that hard to believe. And I've worked with 64Mb files in word as well, which is far more than 50k (text) words.
You might be thinking of notepad. Older versions of notepad had a 64kb limit, or around 14k words.
I've got a 340-page thing (83k words) in MS Word. 2003 onward handles those fine as long as your computer has RAM. Which is cheap nowadays, so I can't imagine it ever being an issue.
I type the whole thing in one file, but to post them to devArt, I separate the chapters into their own separate files. I also have different files for outlines and crap. They differentiate for each novel. So, this is what a few of my novel folders currently look like: [link] (click on the image to zoom in)
I type the whole thing in one file: can't be bothered to go hunting through "My Documents" to find where I said what. I occasionally write outlines in Word, but more often jot things down in a notepad. I'm not a big note-maker.
I type it all into one file and edit it later. For ideas, I write them down in a notebook. At first, I wrote the rough drafts in a notebook, but now I just type it cos it's easier. My method is pretty simple lol
Do you type each chapter in to its own file? Or do you type the whole thing in one file?
Do you use any programs to keep notes, such as Excel, or do you use pen and paper notebooks?
Tell me about your methods of organization, I'm curious.