I learned the double spacing in typing class many years ago. I still do it. In the technical writing class I took in college, the professor's opinion was readability was everything. If anything makes it harder for the reader to stay focused, it needs to be changed. To him, that meant more white space between lines, shorter paragraphs, subtitles, shorter sentences, simply language, or anything that allowed the reader to flow through the material without thinking about it. The Word grammar check for passive sentences helped me out a great deal in that class.
I think I have had Word flag my double spacing with its grammar editor before, but that was a while back. It hasn't done it recently.
I have seen it done both ways, but I don't really care. I just like to do it my way. :)