1. The border you are getting is an autoformatting feature of Word, which I believe was in 97; certainly in 2003 and on. I believe you will find it in Tools/Autocorrect options, on the "Autoformat as you type" tab or a similar one. If the Borders box is checked, uncheck it.
As for getting rid of the ones you have, select the text immediately above and below, and select Format/Borders & shading. Remove any borders.

2. I may be mistaken on this, but it sounds as if the extra line spaces may be hard returns (Enter) at the end of your orginal lines. In your original Word doc, try typing Ctrl+Shift+8 to reveal the hidden paragraph marks. If that doesn't reveal them, look up "display hidden characters" in Help. If you see a paragraph mark (the "backwards P") at the end of each line, that is probably the cause.

You can remove them quickly by inserting a tab at the beginning of each new paragraph, if there isn't one already; then replacing all the paragraph marks (^p) with nothing, then replacing all the tabs (^t) with paragraph, tab (^p^t) to re-establish your paragraphs.

Does this solve your problem?