I did some experimenting. Here's what I think is happening.
In Word 2007 the default style when Word is first installed is called Normal. This style places spaces between paragraphs so that pressing Enter results in a space between paragraphs. There is another style called No Spacing which doesn't place spacing after the paragraph.
Type the following text in Notepad and copy it.
This is text with no spacing
This is the next line
This is a line with spacing before the line.
Paste it into a new Work 2007 document (which is using the default Normal spacing) and it will appear as follows.
This is text with no spacing
This is the next line
This is a line with spacing before the line.
Note there is a blank space after each line break. This occurs because the default style in Word 2007 has spacing after the paragraph.
Copying the text above from Word to Notepad results in the text I originally typed in Notepad.
I don't see the first behaviour you describe. I always see a line feed and carriage return when pasting from Word to Notepad. However, this might happen if the destination application (the one you paste into) uses Unix line endings instead of Windows line endings. Unix lines end in a linefeed; this causes a new line to start at the left margin. Windows lines end in a linefeed and a carriage return. Wikipedia has this to say on the topic
The different newline conventions
often cause text files that have been
transferred between systems of
different types to be displayed
incorrectly. For example, files
originating on Unix or Apple Macintosh
systems may appear as a single long
line on some Windows programs.
Conversely, when viewing a file
originating from a Windows computer on
a Unix system, the extra CR may be
displayed as ^M at the end of each
line or as a second line break.