Blood iron ore is indeed chest drop only. Furthermore, it is Treasure Chest drop or higher only. You will not find it in Small Chests. Your best bet is the mines in Zek. The miners and sentinels there dropped it at a reasonable rate for me (about 1 in 5), but I know luck was on my side. The drop is usually about 1 in 20. I have not confirmed those numbers, but I have a lot of guildies that farm them and that rate seems to be the consensus.
If you are looking for the recipe books, the only place you will find those are in DFC.