Last night, by accident, I found a solution to the problem. Before I need to use the File Save as or open menus, if i click on the finder and get back to word, it opens up the dialog box. Since everything else seems to be working in word, I can live with this annoyance and I don't have to upgrade to word 98.
Excel 5.0 refuses to start saying a memory problem. Powerpoint seems to be working. Like you, I only use Word mostly, I'm happy.
Your post made me play around with word until I came upon the solution. Thanks.