A bit late to the party but hope to give some input.
Please remember, HTMLHelp (CHM's) is nearly 20 years old and Microsoft's Windows based help system is in "maintenance mode" only. No new features and support are expected. As far as I know there is no new help systems being developed at Microsoft.
Please note ("... does not use HTML Help Workshop internally ...") HTMLHelp Workshop is required to install in any case.
You know, most time consuming step must be used for the content and with the experience you have with Microsoft HTMLHelp Workshop I'd recommend using FAR HTML as a low budget tool.
You'd use the Help Express and Wizard features - see: About FAR HTML from our Helpware Group.
FAR HTML is a collection of help authoring and file utilities. If you need to quickly manipulate HTML, XML, ASCII text files, or author help projects (HTML Help 1.x, MS Help 2.x, MS Help Viewer 1.x, Help Viewer 2.x and Uncompressed Web Help) then FAR will save you lots of time and money. You can safely use FAR HTML and MS Workshop/SDK side by side. FAR also works in batch (unattended) mode.
Further information: FAR HTML - Web Help
Foreign Language Version (partial translation available in German) and
Download FAR HTML (full working trial version).
One more recommendation added:
HelpNDoc is available completely free for personal use and evaluation purposes: you can use the full version of HelpNDoc for as long as you want. All the features are available and enabled, there are no hidden fees or registration process and it doesn't contain any virus, spyware or malware of any kind. The only restriction is that the Personal Edition of HelpNDoc or its generated files can't be used for profit: only personal non-lucrative work and evaluation purposes are permitted by the license.
A discreet banner is added in the generated documentation to remind that it has been created by the Personal Edition of HelpNDoc. To remove the banners and use HelpNDoc for commercial purposes, you might consider ordering a full version of HelpNDoc.