Gavin,
OK, here are a few more things you may want to look at.
I don't have Outlook 2010 (I have Outlook 2007), so the menus and selections I suggest may not match what you see on your version of Outlook.
First thing to check is the Message Format: click on the "Tools" menu, select "Options", select the "Mail Format" tab. Under "Message Format" change the drop down list to "Plain Text". If it is set to "Rich Text" or "HTML", that is probably causing the problem. However, you need to know that some people prefer HTML format emails for compatiblitly, but most email software can handle both plain text and HTML. Plain text means that Bold, Italics, pictures, etc may not get passed along with the message as they would if you used HTML format.
Your version may have these format settings on the toolbar or you may activate it on the tool bar. If you can access "Format" on the toolbar: If you right click a toolbar and then select CUSTOMISE..., then under the FORMAT option, drag STYLE to your menu bar, you can then select NORMAL which will give you a single space.
The second thing to check is "Personal Stationary", which also may have formating specifications? If so, you can either adjust the Message Format, or just turn-off the Stationary:
Turn off your stationery: path: [new email] \ Message tab \ Signature button \ Signatures option \ Personal stationery tab\ Theme \ [choose none].
...Rich