mwildem: If I understood correctly, when the problem existed, what you had done was open a blank page on Word 2010 and then cut and pasted the 2007 doc. You solved the problem by simply opening the Word 2007 in Word 2010 and saving it as 2010. Is this correct? In other words, the original 07 files you cut and pasted to 2010 showing the problem were not fixed. You just started over.
I have the same issue except I don't recall cutting and pasting I just opened the file and saved it into the new format. So does anyone know how to solve the problem? I too went to: http://support.microsoft.com/kb/918788 and none apply to me. Many of my doc files do show photos or whatever just some do not--the converted ones I would assume. (Some of the problematic files, not all, may have been converted from Open Office--maybe, not sure)