Yes, splitting the mesh is the correct answer. Each mesh forms a joint. You can use the hierarchy view on the tools menu to organize your joints. Group together each thing you want parented, with the root object as the first object in the group. ie. Group the foot with the shin, making the shin the first object in the group, then group that with the thigh making the thigh the first object in the group, then group that with the pelvis, etc.
The object center forms the pivot point of the joint. You can move the pivots with Tools > Adjust Object Centre, or for more precise positioning of the joint pivots you can use this plugin:
http://www.independentdeveloper.com/...in_pivot_tools
Any mesh name that starts with "NULL_" is treated as a null pivot, so if you need joint handles without geometry you can add them that way.