I have this same problem. I write in Word. I just switched to WordPress from Blogger. A quirky thing with blogger was that I could paste fine from Word to Blogger so long as I was logged in to Blogger with IE. You have to also add one hard return to the end of the text or else Blogger would combine the last two paragraphs.
In Firefox the hard returns in Word were converted to double spaced paragraphs. I tried pasting into both EditorMonkey and Performancing and had the double spacing problem. Links are there, but then you have to go back and backspace out the extra space for every paragraph.
With the default WordPress editor it looks fine in the editor but after you publish the double spacing shows up both using IE and Firefox.
It’s clumsy and I hate it, but I tried pasting from Word into Blogger’s editor then recopying and pasting into WordPress and it worked. But you have to have that one extra hard return at the end and you have to be using IE, as Firefox will double space. Blogger’s editor ignores the Word formatting except the links giving you clean text with links.
I assume the same results can be obtained with the right stand alone text editor or plugin. I just haven’t found it yet. Obviously, a plugin for WordPress would be the best solution.