How do I set up an 8.5x11 booklet/document on 11x17 paper, pages 4-1 on one side, 2-3 on the other?

Question

I realize this is commonly done, but when I create the new document, my pasteboard shows only page 1 on the right side (blank on the left), pages 2 and 3 in the next panel, and in the third panel, page 4 on the left side (blank on the right).
I haven't tried printing it yet, and maybe pages 1 and 4 will print together on one sheet as they should.  But if that's true, wouldn't the pasteboard show just two panes?  Pages 4-1, and then pages 2-3 below it?
And while I'm asking this question, what if I want to add a second sheet?  In that case, the first panel would be pages 8 and 1, the second panel would be 2 and 7, the third would be 3 and 6, and the fourth should be 4 and 5.
If there is a standard way to set this up, I'm very grateful for the answer.

Answer 1

The process you are asking about is called imposition, in case you want to Google for additional information. Imposition is normally the job of the print service, so if you are not printing this yourself (on a laser printer or networked copier, for example), you should leave it as a standard 8.5x11 portrait facing-page document. As a matter of fact, if you were to impose the booklet (thinking that you were doing the print provider a favor by lightening their load) and do it wrong, they would have to undo what you did, which would make their job harder, and you would likely be charged a fee for this.
If, on the other hand, you are printing this yourself, there are a few ways to do this. The easiest would be to select File>Print Booklet. You will have to set the paper size in the Print Settings window to 11x17 landscape, but it should print the booklet correctly. You will need to print this to a printer that can duplex (print on a sheet, flip the sheet and print on the back side, then repeat on the next sheet, etc.) for this to work with the Print Booklet feature (as far as I can tell—I don't use the feature myself, so that's what it seems like in the short amount of poking around that I did). If your printer can't do that, you may have to do it manually.
If you use the Print command instead of the Print Booklet command, it will allow you to do things like printing only odd or even pages, and print in reverse order. Unless you wanted to feed one sheet at a time into the printer and turn the sheet manually (which I suppose you could also do with the Print Booklet command), that's what you would have to do, but you would have to impose manually into another document first. There are InDesign plugins that will impose for you (as well as ways to impose a PDF), so you may want to Google to see what you come up with. Doing it manually can cause you some headaches.
To impose manually, save your document and create a new 11x17 landscape document with half as many pages as your original. You can place the original document into the new one the way you would place images (the pages won't be editiable, so they essentially are images, but you don't have to go the extra step of saving them as PDF, tiff, eps, etc. just to place them). Go to File>Place, navigate to your original document and tick the Show Import Options checkbox and click the Open button. When the Place window comes up, select the All radio button, and your place cursor will be able to place each page in normal sequence onto the page of your new document.
The tricky part is knowing which page goes where, and that's what will probably trip you up. A way to find out where the pages need to go is to take some paper scraps and fold them into a book (start with the number of pages in the book, divide by four, and use that many scraps). Write the numbers of the pages on the scraps in reading order like you were turning the pages of the book, then separate the pages and you will see that the last page is on the left of a sheet, with the first on the right. Turn it over and you will see page two on the left and the second last page on the right. This is the order you will need to place the pages in order to impose manually.
Does that help?