Once you change an inline shape to a shape it is no longer an inline shape so you cannot process it as such. The following should work
Code:
Sub fixLetterHead()
Dim oInlineShape As InlineShape
Dim oShape As shape
For Each oInlineShape In Selection.InlineShapes
Set oShape = oInlineShape.ConvertToShape
With oShape
.RelativeHorizontalPosition = wdRelativeHorizontalPositionPage
.RelativeVerticalPosition = wdRelativeVerticalPositionPage
.Top = 0
.Left = 0
.WrapFormat.Type = wdWrapBehind
.ScaleHeight 1, True
.ScaleWidth 1, True
End With
Next oInlineShape
End Sub