Word 2007 now defaults to having an extra line between paragraphs. You have to turn off (in Styles) the default to having extra lines.
To modify the style, right-click on the Normal style in the style selection boxes on the Home tab, and select modify. [Presuming it is the normal style you're having issues with, which you probably are. Normal is the style on which all other styles are based in Word.]
Change the option down the bottom from "Only in this document" to "New documents based on this template" and then click the format menu button and select paragraph.
Remove the space after from the style if there is any, and under spacing select the box "Don't add spaces between paragraphs of the same style." Click Okay.
Close Word. It will automatically save changes to the style.
You should now have your documents defaulting to no space after, regardless of whether that box is checked.
While you're at it, you might want to set your other style standards for Normal, such as font, etc.
[There is a 'normal with no spaces' style, but this strikes me as a waste of time.]
I also strongly recommend you go into your autocorrect options and turn off any of the autoformat as you type options relating to styles (such as Define styles based on your formatting, etc). That is the stuff nightmares are made of.
) so sometimes you'll have to highlight a section, then set the paragraph spacing back to 0.