To get rid of the undesired line breaks:
Cut and paste into word.
Search and replace - ^p^p with @@@ (or some other random thing that won't naturally occur in the doc).
Search and replace - ^p with either nothing or a single space (do one with no space before the replace all and see if where it replaced it you have twowords with no space - if so, you need a space; if not, no space necessary).
Search and replace - @@@ with ^p^p
Should fix all the bizarre ones without undoing the extra hard return between paragraphs.
No idea how to help you on TOC, though. Have you tried Calibre? It...*looks* like there's a TOC option, but I don't know how to work it.
Good luck!
Bethy
