Office 2003 embedded objects no longer open; is there a way to repair this functionality?

I'm running Micrsoft Office 2003 on Windows XP SP3.  Several weeks ago, I noticed that my PC wouldn't permit me to work on embedded objects anymore.  For example, if I open a Word document and try to insert an Excel worksheet, here's what happens:

In Word:
Open blank word document
Insert/Object/Create New/Excel worksheet
[New window opens in Excel, spreadsheet is called Worksheet in Document 1]
In Excel:
Enter any test data in cell A1
File/Update
File/Close and Return to Document 1
In Word:
Nothing appears

If I copy any active cells from Excel and paste into Word, here's what happens:
In Excel:
Select any cells
Edit/Copy
In Word:
Paste Special
As:  Microsoft Office Excel Worksheet Object
Error Message:  Microsoft Office Excel.  Microsoft Office Excel has encountered a problem and needs to close.  We are sorry for the inconvencience.  
[Error reporting to Microsoft generates no information helpful to me.]
Close error message box.
Another Error Message:  Microsoft Office Word.  There is insufficient memory. Save the document now.

This sequence of events is fairly new.  I used to be able to embed objects without issue on this computer.  I believe some files must have become corrupted.

Solutions attempted already:
In Excel:  Tools/Options/General.  Unchecked ignore other applications.
Test in Wordpad:  Tried embedding PowerPoint slide object.  Object is not visible, but double clicking on it does open a PowerPoint slide with the correct content.
In Wordpad:  Tried to insert Excel Worksheet.  Error message:  Failed to create object.  Make sure application is entered in the system registry.