The best way to create a Table of Contents in MS word is to use Styles. John McGhie wrote a great guide to templates. These practices can also be applied to your document.
Styles in Word are a way of "managing" text. When you set blocks of text to use a style you can then Change the properties of that style. Say for example Chapter names. If you set them all to the same Style. Later on when you decide to change something like the Font, or the Size, all you need to do is change the font or size in the style.
- Chapter 1
- Chapter 2
- etc.
For example: Word 2007 has a lot of built-in styles. Experiment with them. One exercise would be to change your entire chapter Titles to use the Heading 1 Style.
After you make these changes, you can create a Dynamic TOC. In the Ribbon Select the References Tab. Click the Table of Contents Button on the far Left. In there you can click on Insert Table of Contents. Click ok on the new box. There are options in there to play with. This should get you started.
Good Luck!