It needs plain text files as input, but if you're putting things in Word anyway then saving them out as plain text is trivial. There's a chance it won't be what you want, but it's free from my site (
www.kacartlidge.com) so there's no danger of losing out by giving it a go.
It formats it for the Sony PRS505 as default and produces very readable text. You may need to tell it the title and author, plus where the chapters start (it sometimes spots them itself), but once you've done it (and it's really easy) you can get a PDF anytime from the resulting file, any size, any font at the click of a button. With metadata for filing on the Reader and a table of contents from your chapters.
Even if you don't like the output page/font sizes, you could glance at the PDF properties to see what works well for you, tweak and regenerate as you like.