Final answer:
Steve should use a text box to have text surrounded with a line and filled with color, as it allows for both outlining and background color formatting, unlike WordArt, Drop cap, and Text effects which serve other formatting purposes.
Step-by-step explanation:
To achieve the goal of having a paragraph of text surrounded with a line and filled with a color, Steve should use a text box. A text box in most word processing software such as Microsoft Word allows for creating a bounded area where text can be inserted. After placing the text into the text box, Steve can then format the text box by adding an outline and filling it with his color of choice. This is different from the other options which serve different purposes: WordArt is for decorative text, a Drop cap enlarges the first letter of a paragraph, and Text effects are applied to text to add visual effects like shadows, reflections, or glows, but not for surrounding paragraphs with lines and color backgrounds.