Software: Word 2007, Vista, AVG.
Turns out, AVG was the culprit. I removed AVG, and installed my favorite Open Source AV ClamWin, and while I was doing that, looked up the issue on Google and found this:
This person was running AVG anti-virus. We uninstalled AVG and full file access was restored after a reboot. I have not researched this to determine if it's from a recent AVG update or if it's an inherent problem between AVG's engine and Word '07. Bottom line was that uninstalling gave her back her files.
Sure enough, rebooting after the AVG uninstall, the documents opened fine.
Did not find evidence of this issue on AVG's site.
**Just a reminder to those using AVG Free, the license is for personal use only, no business or charitable orgs.