I think they are great suggestions!
Use Process Explorer to try and look at what process are using what memory/CPU/file handles.
Downloaded and tested PE, which is a nice addition to the toolbox, the only new thing that I could see was that there was a rather large amount of context switching going on in WINWORD.EXE, in fact in excess of 1000 switches/sec. I don't know if that is a problem, will try to check that out on another computer.
Everyone says it, and I'm sure you've thought of it, but check any antivirus settings. Word also has a really annoying inbuilt virus checker thingy for macros. I don't know if that's interfering?
Yes this was my first thought, so that has been tested. And I've checked Word's configuration and there is no virus/macro check enabled.
If your OS is running XP SP2 or Server 2003 SP1, try disabling Data Execution Protection (DEP) on the vague off chance. See KB875352 for details.
This idea had I already explored before posting here. But the link was welcome information.