If you have no specific need to use Word, then go ahead and uncheck it for everything. Not using Word, there should not be any setting for line spacing - this feature is only available when using Word as your editor. Restart your Outlook, just in case.
If, after turning off the "use Ms word", you still see issues, please provide specific information on where you are finding this issue.
If you need to use Word you can try these steps:
This feature requires you to be using Microsoft Word as your e-mail editor. Also, line spacing cannot be configured for plain text messages.
When you compose an e-mail message in Outlook, you can change the spacing between the lines and the spacing before or after each paragraph.
HideChange line spacing
1. Select the text you want to change.
2. On the Format menu, click Paragraph, and then select the options you want under Spacing.
* If you only see options for Alignment (Left, Center, Right), and a check box for Bullets, you are not using Word as your e-mail editor. Word is required to change line spacing.
* If you select Exactly or At least for line spacing (line spacing: The amount of space from the bottom of one line of text to the bottom of the next line. Microsoft Word adjusts the line spacing to accommodate the largest font or the tallest graphic in that line.), enter the amount of space you want in the At box. If you select Multiple, enter the number of lines in the At box.
Hide/Change spacing before or after paragraphs
1. Select the paragraphs in which you want to change spacing.
2. On the Format menu, click Paragraph, and then under Spacing, enter the spacing you want in the Before or After box.
Note If you only see options for Alignment (Left, Center, Right), and a check box for Bullets, you are not using Word as your e-mail editor. Word is required to change paragraph spacing.