Turns out my problem was due to LaserFiche. Running LaserFiche 7.2 the "Send to Word" functionality was preventing the mouse from responding within a Word document. Funny thing, it had happened in previous versions of Word also.
If you are a LaserFiche user you need to apply HotFix SCR28596, Knowledge Article 1011746.
Refer to Part 1 on July 30, 2007.