1) First, back up your document. All major changes should be backed up beforehand so go ahead and do that.
2) Next, you must replace the italics with a special character(s) to surround words that are italicized.
a) Enter, into the replace (ctrl H) command in word, exactly what is below.
b) Make sure your replace command has the Font: Italics in the Find What: and that Use Wildcards is checked.
Note: the ~ character in the ~~\1~~ should be a character not in your document, such as ??\1?? Or ::\1::. If you have a bunch of ~~ in your document, it will confuse the replace command. Use a unique character to your document.
3) Format your document as you want it formatted. (You can kill all formatting, the next step will get your italics back)
4) Finally, replace the special characters with the italics again. Enter exactly the screen below to get your italics back. (Note: if you switched from ~, use your new special character)
a) Remember the Use Wildcards and that the Font: Italics is moved down to the Replace With: area.
Recap: The basics of what we did is that the (<*>) creates a variable for all of your italic words. We create a way to identify it later, then we find all of the special characters and replace it back to the italic version. Simple as pie.
Note: It was pointed out to me that you can use (?) instead of (<*>) to get a character by character replacement of your italics. This has its advantages if you use italics mid word or with special characters. For most novels, either should work nicely. This is also good if you plan to replace other formating other than italics.