I've found that the way to submit a story that causes the least amount of problems is simply to copy & paste the story into the box provided. If you do that, however, make sure that you have smartquotes turned off in Word.
I've not had the first formatting problem doing it that way.
Maybe Wierd Harold will be along and have a better answer for you...or you could PM him. He usually knows the answers to these types of problems, that is, if you would still rather upload instead of c & p.