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Not sure what you are talking about with the "tiny picture" comment. Mobipocket Creator creates a windows about 800 x 600 pixels in size on my laptop. I would definitely download the Publisher version, not the Home version.
You might want to use a Word doc as input, save as filtered HTML, and use that to input into Mobipocket Creator. .mobi files are based on a simplified HTML. You are going to have to become familiar with HTML to do any significant formatting work.
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