I do my writing in my own software,
The Journal. However, I export my stories and novels to RTF format, run the RTF through a processor (that I also wrote) to standardize the formatting and beautify a few things (like curly quotes), and, finally, bring the RTF into Word to make it a DOC. From that point on, it's all Word all the time to create the final ebook doc files for DTP, Smashwords and PubIt.
So...yeah...I write in a specialized application. I do final formatting for the ebook in Word 2002 (because I'm too cheap to replace an MS Office version that still works quite well).
-David