The follow registry edit seems to be a fix for the error:
Word could not create the work file. check the temp environment variable
Steps:
Open regedit.
browse to HKEY_LOCAL_MACHINE\SOFTWARE\Classes\CLSID\
Backup the CLSID
Delete keys:
HKEY_LOCAL_MACHINE\SOFTWARE\Classes\CLSID\{00020827-0000-0000-C000-000000000046}
HKEY_LOCAL_MACHINE\SOFTWARE\Classes\CLSID\{65235197-874B-4A07-BDC5-E65EA825B718}
HKEY_LOCAL_MACHINE\SOFTWARE\Classes\CLSID\{84F66100-FF7C-4fb4-B0C0-02CD7FB668FE}
Reboot.
Test.