I can see a couple of problems with the "Word" approach. Word isn't 100% HMTL compatible, so just doing a cut and paste isn't going to give you a good result. You can use "Save as" in Word and select HTML format for a possibly better result. For best result, I'd save your Word document as simple text (.txt) and use Notepad to cut and past the code into the lister. Use the lister's tools to format your text, etc.
You can't directly embed a picture (file itself) in a listing. What you can embed is a link to where a picture is stored. In this case, upload the image to Auctiva and use the "Insert an Auctiva Hosted Image" icon (next to UserLinks) on the listing editor toolbar to embed a picture. You will see the picture appear in the listing editor and can do positioning and formating there.
Hope that helps.