Having trouble figuring this out... help please

Typically, this would be done with an imposition program. I suggest first making a list of the printers spread pages you need- 40+1, 2+39, 38+3 and so on. Then take 10 sheets of paper and fold them in half to make a dummy. Add page numbers to your dummy, 2-up, in the desired orientation (generally, the last page would be rotated 180°). Use two InDesign files, one single page file of all pages at the desired final trim size and one at 14 x 8.5". Try to visualize your book as a normal, left binding book, but all the copy is rotated.

Place the single page InDesign file into the larger file, using your unassembled dummy pages as a guide. Export to a PDF.

In addition to the advice from Derek and Migintosh, you can rotate the spread through 90 degrees CW (View>Rotate Spread) work on this as a facing pages document.

In your mock-up, if the front cover and back cover were 7" tall, your paper would need to be 14", not 11.

Are you hoping to print this yourself on your office desktop printer or put it out to a commercial printer?

If it's going to a commercial printed just produce your 40 pages separately and get your printer to do the imposition. Discuss it with the printer before proceeding.

If the booklet is to have a "self cover" I suggest, to avoid confusion, that you start the page numbering from the front cover (the number need not appear on the front cover of course).