Sorry I don't have PhotoStory here, but the product information from Magix certainly suggest chapters are possible:
'"Add the finishing touch to your slideshows with animated CD/DVD menus just like the ones on store-bought DVDs complete with scenes from your own pictures as backgrounds, intro videos, music playback, animations, interactive buttons, etc."
Have you searched for 'Chapter' in the help file? In most other Magix video editors the chapter divisions are placed but positioning the play cursor at the desired location and pressing [Shft]+Enter] keys.