OpportunityDoc,
Here are a couple things you can try:
1) If you are pasting from MS Word, be sure to use the "Paste from Word" button on the browser. This button has an icon with a clipboard and an "M" on it.
2) Before previewing, highlight all your text and select "Paragraph" from the format pulldown menu. This will eliminate the extra spaces that are added whenever you use the ENTER key.
3) Try using the full sized editor. I've heard reports that the full sized editor doesn't have the formatting issues like the standard one.
I hope this helps=)
-Mike