Typesetting / Letter-Resized Paragraph Justification

Not certain I understand what you are asking. Let me try rephrasing -- Are you wanting to justify blocks of text (paragraphs, a page?) and have it not have large sections of spacing between words inside those blocks?

Oh, and what version of Word are we talking about here?

ETA: MSWord doesn't do "extra gaps" by default. (Neither does OpenOffice, btw.)
This might be a source for your answer.

No. You can't have it both ways, if you want the lines to extend from margin to margin; there must be some extra space somewhere. This isn't typesetting.

However, if you use the Block Quote with full justification (which is what you really mean, I think) the "extra" spaces will be less noticeable.

Of course, you could overcome this "disadvantage" of desktop publishing in MS Word by using a more expensive layout program, like one for book designers. Quark InDesign.

No. Don't go to Quark. Seriously. Ken, email me to tell me what you want to do.

Quark is expensive, it uses a hardware dongle, and every version is pretty much incompatible with the previous version. IndDesign is much more reasonable, but honestly, you might not need either.

email: lisa at digitalmedievalist.com

I'd ask why you want that... you're talking about proportional spacing. It is a typesetting term and Quark and Frame and probably some others will do it at a big cost... but again, what are you trying to accomplish?

If it's an ebook or an article for the web it's totally not necessary, and in fact I do books over at lulu.com without it.

There are some studies which I can't find at the moment that say ragged right, which gets you even spacing between words, but not an even right edge... like here, is more readable because the eye likes regular spaces and with proportional you tend to get rivers of space drifting down the page.