Try converting it to a format like .rtf first and importing it into Word. If there's a manual line break or a paragraph break, you can use search and replace to get rid of it.
Use the reveal codes feature to see exactly what's there and then create a search and replace. If the proper paragraph breaks have two paragraph breaks, then replace those first with "&&&" or something random that doesn't otherwise appear, then replace the single paragraph breaks (your bad word wrap) with a space. Then replace &&& with a paragraph break. Or if the proper breaks have a paragraph break then a tab, replace those with &&& and then replace the single ones with a space. You get the idea.
Word's search and replace feature is very powerful, and with a little trial and error, any consistent problem can generally be fixed.
Once you have the document fixed in Word, then save as .rtf and convert to .mobi.
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