How can I avoid image 'distortion' when saving jpegs from Photoshop?

I've created a logo with a transparent background and saved as an eps in Illustrator CS3.  To create a jpeg I then opened opened the eps in Photoshop CS3, set the resolution at 300ppi and then saved the image as a jpeg.  The image views ok on screen but when it is inserted into a word document and then printed, the background of the image is 'blurry' - it has small red dots through and you can see also the 'edges' of the image.  Not sure what I'm doing wrong!  Any help would be greatly appreciated.

Thanks for all the ideas.  Had to have a jpeg at the 'clients' request so I couldn't use the .psd and .png options.
I came across some info stating MS Word doesn't support CMYK jpeg which I did not realise.  So to solve the issue, I ended up opening the eps file as a Smart Object in RGB colour mode at the required resolution in Photoshop CS3 and then saving as jpeg.  The jpeg then printed perfectly after being inputted into a Word document - no blurriness or resolution issues.  I just had to advise the 'client' about the colour issues with RGB vs CMYK and not to use the jpegs for any professional printing.
Thanks again.

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