A further update:
I was suspicious of the auto-recovery save feature, and checked to see if the auto-recover folder was set correctly. It was blank, so I set it to the auto-recover folder in the ~/Library/Application Settings/Microsoft/Office folder. However, that did not fix the problem.
Now, the disk error message has recurred, like the earlier one that triggered me (and Apple Store) to think I'd lost my hard drive and replace it. The message says:
There is an unrecoverable disk error on file .
The disk you're working on has a media
problem that prevents Word from using it.
Try the following:
* Try formatting another disk.
* Save the document to another disk.
The disk is not bad, unless Word has just now corrupted it. I seem to be unable to exit Word and so I force quit it, but now the system is bogged down. Activity Monitor shows that syslogd is using up 85% of CPU time. I'd better restart.