Out of the package Word defaults to lots of spaces between lines and paragraphs. There are two methods to change the default to just one space between each.
#1 - Microsoft Support's Mr. Fix-it works great to fix this, and I used that.
Or, if you want to do it manually:
#2 - To fix the line spacing and paragraph spacing in Word 2007 so that it is the same as in earlier versions of Word, you have to change the Style Set option.
To do this, follow these steps:
Click the Home tab.
Click Change Styles in the Styles group, point to Style Set, and then click the style set that you want to use.
To change the default formatting of your document, such as the line spacing and paragraph spacing, to the default formatting that is used in earlier versions of Word, click Word 2003.
To set the style set as the default style set in Word 2007, click Change Styles in the Styles group, and then click Set as Default.