The Path Between the Seas - The creation of the Panama Canal 1870-1914 By David McCullough. Simon amp; Schuster (out of print, but available through libraries and remainder book stores). This is a highly detailed and very readable history book.
Panama Canal Authority - the official Panama Canal website - is strong on post-1999 canal administration and modernisation with good photos and animated diagrams on how the locks work.
"Make the Dirt Fly" is an exhibition on the Smithsonian Institution Libraries website. It provides a brief, well-illustrated history of the building of the canal, and features many original photos and documents from the SI's collections.
The Tailor of Panama. By John le Carre. Sceptre, pound;6.99
This is one of surprisingly few good works of fiction based in Panama. The atmosphere of the final years of US control is excellently portrayed.