We have a few users at my work who have been experiencing this problem.
They use Office 2003 and receive a document from someone using Office 2007. They HAVE downloaded the compatibility pack and are able to open the 07 documents fine, IE: a word doc opens fine.
However an excel spreadsheet that has an embedded object, such as a Word document does NOT open. Well the Spreadsheet itself opens up, then you see the word doc icon and clicking on it, it pops up with a message box saying "covert file" and gives options for converting it to a different format, rich text, html, works, etc. Whatever the user clicks on the document comes up as scrambled unreadable gibberish. If you choose to cancel the 'convert file' window you get the message 'cannot open source application'.
Does anyone have any ideas?