Not with text files (at least, not without a third-party addin written for the purpose). Although you can link to them from Word using an INCLUDETEXT field, the link won't update until you both save the updated text file and refresh the field in Word. I am not aware of any a third-party addin written for this purpose.

With DDE-aware applications such as Excel, though, using a LINK field in Word to connect to an Excel range allows changes in the Excel range to update in Word in real-time.

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Cheers,
Paul Edstein
[Fmr MS MVP - Word]