Word 2010 - convert doc to .docx promts to "save as"

We are experiencing two different behaviours when converting an Office 2003 document depending on its saved location.

1. If we open a .doc from the local C: drive it opens in compatibility mode as expected. We use the File>Info>Convert option which removes the compatibility mode then select save. The original .doc is replaced by the new .docx and only one file exists. All is well.

2.  If we open a .doc from a network drive or UNC to the network location of the file it opens in compatibility mode as expected. We use the File>Info>Convert option which removes the compatibility mode then select save. We now are prompted with a "Save as" window to save the .docx in the same location. If we continue to save in the same location as the original file we now have two files, one in the original .doc format and one in the new .docx format. We do not want this behaviour. I have modify and write permissions on the network locations.

I am unable to find any info on resolving this issue. Any help is greatly appreciated.

Regards

Tony