Microsoft Word (1997-2003) format maintains as much formatting as possible, including graphics. Each object appears in an individual text field. Microsoft Word (1997-2003) editable format does not preserve as much formatting.
This is a known issue as the Microsoft Word - Editable (RTF) format is a page-based format and not all of the layout and formatting are preserved in the output. This format converts all of the report object contents to text lines and does not use text frames. Text formatting is retained, but attributes such as background colour, fill pattern, etc. may not be retained.
All images in the report are in-lined with the textual content and, therefore, the images automatically shift to accommodate text when the document is edited in Microsoft Word. This format does not export line and box objects from your report.
Note: The Microsoft Word - Editable (RTF) format has an option to insert page breaks at the end of each report page. This option may not correspond to the page breaks created by Microsoft Word - the option is used mainly to separate the report-page contents.
There are broadly two export formats supported in Crystal Reports: page-based formats and record-based formats. The page-based formats tend to produce a more exact output. The emphasis of these formats is layout representation and formatting. With record-based formats, the emphasis is on data rather than the layout and formatting.
For further details on this refer to SAP document '1310166 - Exporting a Crystal Report to MS-Word Editable RTF does not retain original formatting'. Note that you will need a SAP userid and password to be able to access the document.