If your images are aligned well (no significant seams), then I believe the distortion you speak of is due to the type of
panoramic image projection.
If your software supports it, use a "rectilinear projection" as this maintains straight horizontal lines. Most software programs default to a "cylindrical projection" since this can span any angle of view (up to 360deg even), while the rectilinear projection is not advisable beyond what angle you could get with the widest lens. If you cannot do this with the software you have, try PTAssembler as this is one of the most feature-rich stitching programs out there. It may not be the easiest to use (although this has improved dramatically), this comes increased power and flexibility. Even though it has a one-click "autostitch" feature, I always recommend manually selecting each control point as this can produce truly seamless stitches
(assuming the
nodal point of your camera lens remains the same for all shots).
There's also a new article up on
using photo stitching software which discusses blending the seams between photos and selecting control points.
Hope this gets you started.