Why attempt to change Normal.dot to do this?
I don't know Word 2007 so I am not sure if your Normal.dotm is the same as my Normal.dot in Word 2002, or if the m after dot is an error.
When you delete Normal.dot then re-open Word it will always be re-created. If you want to create your own template, then design your template from a blank document page, (eg decrease line spacing), then save that document as a template document. In the Save As window select "Save as type" and then "Document Template".
Make sure you know where you save it, usually where Normal.dot is stored. Then in Tools > Options find where to make Word default to your template rather than Normal.dot.
The other way is to save this document with the name Normal.dot, (or Normal.dotm), and replace the existing one, but I would keep the existing Normal.dot somewhere in case you need it.
I'm intrigued why you don't want spaces between lines. I just tried it, could only get the spaces down to 0.5 and it looked awful.
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