The empty lines are not spaces... The lines you see in code view are not visible in the ePUB or bookview. The margin in your classes are causing this. Read up a little on HTML/CSS and you will see.
Don't use Word HTML export unless you are willing (able?) to clean it up. I would recommend other means to get HTML from Word. I usually don't do this, but if you use my add-in, you can produce a basic ePUB from Word directly. In the current version you need Sigil to split and create the internal TOC (ncx), but that is on my list to do.