James- The latest RTF spec is available from the Microsoft site. If you are serious about this, download it and open it. You might check for RTF problems with XP and your version of MSWord while you are there. Check to see the effect of "compatability mode" on XP's Clipboard function, too.
Then you might generate a small RTF file as before and save it to file. Open it in Notepad or MSWord in txt format. Word will fight you on this, but eventually, you will find a format in the Word "Open" menu that will show you the RTF formatting.
If all else fails, send me a copy of said short RTF file, and I'll have a look at it in Win98SE and Word97. My computer hasn't had a power supply burn out in over two days now, so maybe I can find something.