How to dynamically group content in a views listing
Try this out.

Add the taxonomy term (or entity) reference field to your output, exclude it from rendering, and configure the format settings to group on this field.

Add a relationship to you view based on the term (or entity) reference field you are using to reference the taxonomy terms. With this relationship, you can now add a sort field using the taxonomy term's weight. When you click to add a sort field, filter the options to taxonomy term using the drop-down select to the right of the search field in the add sort dialog. Once filtered, you will now see the taxonomy term weight.

Adding this to your sort, will allow you to sort the view results based on the node's referenced taxonomy term's weight within the taxonomy vocabulary. You could also sort on the term itself, if your term names will include numbers like, "1. Chapter 1" and "2. Chapter 2", etc.

Jason.