Hi Cathy - the info about ALT text was accurate, but unfortunately, as you've discovered, the Kindle text-to-speech engine doesn't yet pay any attention to ALT text. I don't know of any workaround for this, I'm afraid. If text is presented in an image, rather than as actual text, it simply won't be read out on a Kindle. Hopefully this is something that Amazon will address in a near future update of the Kindle TTS software.
I'm intrigued that you get a larger space between first and second lines when you use an "up cap" - I've used them myself, and not seen any difference in line spacing. However I don't think there's anything you can do in your Word formatting that would carry through into the prc file that would influence line spacing. In the HTML code, that is controlled by CSS, and the MOBI format doesn't include any native support for CSS - just fairly basic HTML plus a few proprietary HTML tags. Programs like Mobipocket Creator which convert HTML into a MOBI format file simply convert any CSS into the nearest HTML equivalent, or discard it.
Heh... sorry to be so negative, but I'm afraid you picked two things which, currently, MOBI format and/or the Kindle simply can't do.