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If you want to start with a Word doc, I would suggest you use OpenOffice (or now, LibreOffice) and the "writer2epub" plugin. (There is a writer2epub forum here as well.) As Toxaris suggested, use styles in your document as much as possible, to simplify your results. The OpenOffice to epub route will be much much easier than trying to clean up a Word-generated html file.
This will get you a fairly basic but functional epub, which you can easily tweak with Sigil to get the appearance you desire.
The epub will be fairly easy to convert to other ebook formats, particularly the mobipocket format for Amazon Kindle. (But that's a whole 'nother topic!)
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