IE7 runs in "low integrity" mode on Vista (aka "Protected mode") - this means that, by default, it has even less access to your system for security reasons. If Word is started from IE7 when accessing a URL still in "Protected mode" (i.e. not in "Trusted sites") then it will also be launched in "low integrity" mode.
However, the "Content.Word" folder in "Temporary Internet Files" is probably marked as "medium" integrity, because it was probably created when IE7/Word was executed previously when in Protected mode. This means that the folder cannot be accessed by Word now, as Word is "low integrity" and the folder has A higher integrity!
You may need to lower the integrity of that folder using a tool such as Mark Minasi's chml.exe: http://www.minasi.com/apps/[/URL
] to get it to work with URLs in Protected mode. Or add the site of the document to your Trusted security zone.