To publish on Smashwords, all you need is your book as an MS Word document (.doc). However, sometimes Word's attempts to "help" are problematic. Here's a few tips guaranteed to save you some time (and headaches) while preparing your eBook source document.
First of all, let me point out some differences between working with an eBook and working with their paper counterpart. For one thing, eBooks have no pages; it's more of a long scroll which may or may not contain a few special "breaks" (between chapters, for example). In addition, you are creating a document which must be translated into several electronic formats. The best advice I can give is this: Keep It Simple.
For the first step, I strongly suggest using the method outlined by Smashwords founder Mark Coker in his book, "Smashwords Style Guide." Open your book document in Word, click the Select All option, then copy the whole darn thing onto Notepad. Copy it there and paste it into a fresh Word file. This will remove any nasty little formatting bugs. Save the new document under a new name. This will be your working file; the original remains untouched as backup in case something terrible happens.
The most common errors pertain to indenting paragraphs. Do not use the Tab or spaces for this. Use Word's style feature; there's a preset named "Body Text First Indent."
Although it is common in print books to start new chapters in the middle of the page, more than four blank lines in your document will result in the insertion of a blank page in some formats.
Do not use columns, text boxes, or tables; they are not supported. To create a drop quote, use the style feature again. "Block Text" works very well for this.
If you want to use drop caps, simply enlarge the font size.
Font size: Never exceed 18pt.
Do not use headers or footers. If your book has footnotes, move them to the end of the chapter or the end of the book.
If you're okay with naming your chapters, "Chapter One" or "Chapter 1," do it! The Smashwords meatgrinder has a nifty feature which zeros in on the word "chapter" while building the auto-directory. A functioning auto-directory is one of the requirements for acceptance into the Premium Catalog.
Well, that's all I can shake from the top of my head for now. If I remember anything else important I'll be sure to let you know. Oh, and feel free to ask any questions YOU might have. That's what I'm here for.