Any decent text editor? Vim? Emacs? Textmate? Notepad++? They're all free.
You could use any scripting language with regex capabilities: perl, python, sed, awk, lua, etc., probably with a one-liner.
For a text file:
Code:
perl -pe 's/([^\.])\n\n/\1 /g' filename > new-filename
would replace every double line-break following anything but a full-stop with a single space, if I'm not mistaken.
I can't stand Windows. I can't stand Word. So I'm afraid I can't help you do it there.