I am a little confused on how a wizard's spellbook works.. I used the dnd insider to help me create my character so I am assuming it knows what it's doing.. anyway, it's allowing me to take 3 at will powers, 2 encounter, and 2 daily powers. Am I allowed to use all of these before I take an extended rest, or does this have something to do with my spellbook where I have to pick and choose what to cast after every rest?
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The powers you're picking are what is available in your spellbook. You can cast any at-will and non-utility encounter powers as if you were a normal class. However, after each extended rest, you must pick which one daily or utility power of each level you will have accessible until the next extended rest.
All the spellbook lets you do is swap out which dailies and utilities you have selected. You can only swap after an extended rest, and can only swap for other powers in your spellbook.