Before we tackle the "text outside the dotted red line issue" you have to get the Microsoft Word formatting out of your blog post's code. When you paste from Word directly into the "Write" area it copies in all sorts of formatting code that can cause a whole bunch of issues when trying to format your text.
To get rid of the the Word Formatting code.
1.Edit the post in question.
2.On the Visual Tab (as opposed to the HTML tab) click on the last icon on the right (it looks like three rows of colored squares). This will expand more options.
3.Click in the write area and select all your text (CTRL+A), then CUT all your text out (CTRL+X).
4. On the new row of options find the icon that has the Word Icon ontop of a clipboard. Click this "paste from Word" option and paste your text into the popup window. Click the Insert button on that window.
5.Check the HTML tab now to make sure you dont see any class="MsoNormal"
6. Save your post.
---------- Excerpts-------------
To get shortened versions of your posts on your main page.
1.Backup your theme's index.php file however you see fit. (usually copying, pasting and renaming it to something else will suffice)
2. Open the index.php file in your theme's folder
3. Inside The Loop replace:
<?php the_content('Read the rest of this entry »'); ?>
with
<?php the_excerpt(); ?>
Hope that helps.