Unless you have a special reason to write your book in InDesign, I suggest you write it using a word processor application such as MSWord, and then import (Place) the document into InDesign. You can learn how to use InDesign from the many InDesign books available and from online/DVD training such as www.lynda.com.
The direct answer to your questions is: File > New > Document. Select Custom from the Document Preset drop-down, Intent: Print. Tick Facing Pages. Type in your page sizes and confirm the margins you want. And save as a Preset. Then away you go. Though you need to learn about Master pages and so on so you can add folios etc.
Alternatively you may consider handing the production over to a digital printing company that can handle the whole production for you from manuscript to printed books. A popular company who specialise in short runs is: www.lulu.com.Derek
... also anything else i should know about indesign before writing a book in it?
If your very first problem is you don't know how to set the size of your book, I'd strongly advise you to stick to writing it first. I'm with Derek: use a word editor, instead of a DTP package. InDesign is a fiercely complicated piece of software to begin with, even for graphic professionals, and it's not meant to constructively help you writing stuff.
I'm starting to write a book that needs to be about 7 1/2 inches by 5 inches.
What the others have said, and also, in book work "about" doesn't cut it. When it's time to actually lay out the manuscript, check with the printer about sizes. Printers for the self-publishing crowd often use only certain fixed page sizes to keep things simple and fit the equipment they have, lowering cost. Job printers may give you more flexibility, giving you a range of sizes that are appropriate for their equipment. You'll also want to know what the "signature" size they use will be for each page size (a signature is a group of pages printed on both sides of the sheet, then folded for binding) if they print signatures rather than "book blocks" (stacks of individual pages glued into a cover). The size of your print run will have an impact on how it is printed. You need to work in multiples of the signature size, or you'll have a whole lot of expensive blank pages at the end.
Pick a page size and set up the margins you THINK you want to use, then set a few pages or a chapter and see how it looks. At that point you will probably need to adjust margins, font size, or even possibly page size, if that's an option, then flow all the text and see how the page count is doing. Rinse and repeat as necessary.
Book designers use a whole bag of tricks to tweak and fit copy into the allotted space once a general layout is established. It's a lot more complicated than the writing part, in its own way.