I buy epubs from Smashwords and Fictionwise. (And publishing-house stores: Samhain, Baen, etc.) I don't buy from Kobo or B&N because I won't do DRM, and I won't buy books that won't tell me whether or not they're DRM'd.
What I've heard about Smashwords' conversion is:
Follow the style guide. Follow the style guide
religiously; follow it
all the way through; yes, this will take some hours *in addition* to all the other formatting you want to do; do it anyway.
Oh, and accept that the RTF output will be borked, despite starting with a .doc file. No idea why; it just is. The RTF version of the Style Guide instructions is borked, and I assume that's as good as it's ever going to get.
(While I can understand the desire to get SW to accept user-generated .epubs, I can also understand SW not wanting to increase the number of *botched* .epubs caused by people who think they know how to format them, and don't. Starting with Word, even if the style guide is ignored, gets you a usable ebook. Starting with user-generated .epub may result in a book that won't open on any current device. And yes, SW could install an epub-checker for user submissions... and I'm sure if anyone wants to write that code & turn it over to them, they'd be happy to implement it.)