I've had good success with OpenOffice which is free. It doesn't have some of the more powerful features I use (or at least can't find them) but it's good for most things.
I do all my ebook conversions from html to format X. I just find it give a more accurate view at the end result. OpenOffice has a fairly clean html formatting especially compared to MS Word.
Load your file into OO and save it as html. Then open up that file and work on it (fix spacing, add headings, etc). Then import the html into Calibre and do your convert.