With all due respect I have extensively used Word, InDesign, & LaTeX and, contrary to your belief, typesetting can be (and is often) achieved in Word quite effectively.
Sure, ligatures have been supported for a while (since Office 2007, I believe). In any case, I was able to enable them in Office 2010. I would post a screenshot, but my Windows VM crashed when I tried to take one, and now refuses to start. I'm sure you can find info on it online.
I know that people like to harp on and on about how great LaTeX or InDesign are, and when it comes to complex layouts (particularly LaTeX if there are lots of referenced figures and InDesign for text wrapping, etc.), I agree. If you were writing a scientific article, I'd tell you to use LaTeX. If you were creating a magazine, I'd tell you to use InDesign.
But for your typical, text-only, fiction novel, the kind you're most likely to read on a Kindle? I don't think it really makes a difference.
FWIW, I don't think any publisher that uses an actual printing press uses Word to typeset books, simply because they almost certainly use the whole Adobe toolchain for prepress [1], and InDesign integrates much more nicely with this process. For example, Word has no facilities for color spaces, separation, or generating the actual plate images.
I guess they could generate PDFs from Word files with Acrobat and shoehorn them into the process, but any publisher that is actually satisfied with doing that is bonkers.
If I wasn't fond of Emacs, I would probably do my writing in AbiWord or WordPad. Putting a lot of work in a bloated format like .doc(x) kind of scares me. Though maybe Word with rtf would perform well.
Well, as you can probably tell from my initial post, my knowledge of mainstream publishing practices is nil. Though from what I can discern, a lot of the problems have to do with poor technology usage.
People make a big deal about how using Word will lock you into a certain format when they're storing their data on floppies or, even worse, rasterizing it and keeping just the PS. Seems like the latter is a lot worse than the former.
